B
Backtesting applies declared trading rules to historical data to estimate how the model would have behaved. A useful test specifies data provenance, decision timing, entry and exit rules, costs, fill assumptions and rejected trades. The result is a simulation of those choices; it is not a record of orders actually executed with a broker.
Example. A rule confirmed at an hourly close cannot automatically receive that same closing price as its fill. A model could instead use the next available executable quote and record any delay or adverse movement.
Common mistake. Clean-looking equity curves can result from unrealistic fills or missing costs. Preserve unsuccessful trades and operational assumptions, and distinguish a schematic example, a historical study and independently verified live results.
Define a reproducible strategy study · Review execution assumptions
Reference: QuantConnect: backtest and live-trading differences.
Balance usually records realised account cash effects, while equity or net asset value also reflects the current valuation of open positions. Exact treatment of financing, fees and credit depends on the platform. Equity therefore changes while a position remains open even when the displayed balance has not changed. Neither is automatically the amount available to withdraw.
Example. With USD 5,000 balance and an unrealised USD 200 loss, a simplified account has USD 4,800 equity. If USD 1,000 is required as margin, simplified free margin is USD 3,800, before other adjustments.
Common mistake. Judging risk only from balance can hide open losses. Check the broker's actual equity, margin and closeout definitions rather than assuming every platform uses the same display conventions.
Read margin and equity together · Measure account declines
Reference: OANDA: account valuation definitions.
The bid is the quoted price at which you can sell the base currency; the ask is the quoted price at which you can buy it. For an ordinary marketable forex position, a long opens at the ask and closes at the bid. A short opens at the bid and closes at the ask, subject to execution.
Example. With a hypothetical EUR/USD bid of 1.1000 and ask of 1.1002, buying and immediately selling 10,000 units at unchanged quotes produces a USD 2 price loss: 10,000 multiplied by 0.0002.
Common mistake. A bid-only chart does not show every price relevant to a short position's exit. Check the broker's trigger side and execution rules before comparing an order with a visible candle.
Understand executable prices
Reference: OANDA: bid and ask prices.
A breakout occurs when price crosses a previously defined boundary under a stated confirmation rule. A wick crossing, completed close and executable quote crossing are different tests. A false break is a retrospective classification whose return condition and observation window must also be specified; there is no single universal definition.
Example. Suppose a study requires an hourly close above 1.1060. A high of 1.1064 followed by a close at 1.1058 does not qualify. A close at 1.1062 qualifies, but does not establish what happens in the next hour.
Common mistake. Calling every losing trade a false break can disguise vague rules. Define invalidation, expiry and fill assumptions before studying the outcome, including cases that never return for a retest.
Build explicit breakout rules · Study chart boundaries
Reference: CME Group: trend and continuation patterns.
C
A candlestick displays an interval's open, high, low and close, abbreviated OHLC. Its body spans open to close, while wicks extend to the extreme values. The bar must also be identified by instrument, timeframe, timezone and price type. A bid candle, for example, summarises bid observations rather than every executable ask price.
Example. A candle opening at 1.1008, closing at 1.1010, reaching 1.1012 and falling to 1.0990 has a two-pip body and an 18-pip lower wick under a 0.0001 pip convention.
Common mistake. OHLC alone does not establish whether the high or low happened first. If a later candle reaches both a stop and target, their sequence remains unresolved without finer data or an explicit modelling rule.
Read illustrated candle examples
Reference: CME Group: candlestick and OHLC charts.
CPI tracks changes in prices paid by consumers for a defined basket under an official statistical method. An index level and its percentage change are different quantities. Monthly and annual inflation rates compare different periods; headline and core measures cover different baskets. Seasonal adjustment is another distinction that should be preserved when comparing figures.
Example. An illustrative index rising from 300 to 303 increases by 1%: 303 divided by 300, minus one. Annual inflation slowing from 4% to 3% means the measured price level is still rising, just more slowly year on year.
Common mistake. Do not compare a monthly actual with an annual forecast. A lower positive inflation rate is disinflation, not necessarily a fall in the price level or a guaranteed policy change.
Read CPI units and comparisons
Reference: BLS: consumer price index questions.
Contract size is the amount of underlying exposure represented by one contract or lot. It connects a quoted price movement to cash profit or loss. Futures exchanges standardise their contracts; CFD providers specify their own symbol terms. Similar names or prices do not establish identical quantities, minimum increments or settlement arrangements.
Example. For a hypothetical gold CFD with 100 troy ounces per lot, 0.20 lot represents 20 ounces. A USD 5-per-ounce favourable movement produces USD 100 gross price profit: 20 multiplied by 5.
Common mistake. Never copy a 100-ounce assumption merely because the ticker contains gold. CME's standard and Micro Gold contracts have different sizes, and your broker's CFD specification must be checked separately.
Check gold contract size · Calculate gold profit and loss
Reference: CME Group: gold product units.
A currency pair expresses one currency in units of another. The first is the base currency; the second is the quote currency. Buying EUR/USD creates exposure to the euro rising relative to the US dollar. Selling the pair creates the opposite directional exposure. The displayed exchange rate is separate from the quantity traded.
Example. At a hypothetical EUR/USD rate of 1.1000, one euro corresponds to USD 1.10. A position representing EUR 10,000 has USD 11,000 of notional value at that rate, before considering margin or costs.
Common mistake. Do not reverse the quote when converting units. Account currency can also differ from both currencies in the pair, adding a separate conversion to cash profit or loss.
Read forex quotes
Reference: OANDA: currency pricing conventions.
E
An economic surprise is the difference between a released figure and a comparable expectation, often a survey consensus. It is distinct from the change against the prior month. A useful comparison matches the series, period, units and seasonal treatment, and records which forecast source and timestamp were available before the release.
Example. Monthly CPI of 0.4% against a matching 0.2% forecast is a positive 0.2-percentage-point surprise. Calling it a 0.2% difference is ambiguous; a relative percentage calculation would answer a different question.
Common mistake. Calendar colours compress complex information. A numerically higher release is not automatically beneficial to an asset, and revisions or simultaneous data can offset the headline. The surprise alone is not an execution rule.
Compare release numbers correctly · Handle payroll revisions
Reference: CME Group: economic data surprises.
Expectancy is an average outcome under a specified distribution of trades. It can be expressed in cash, return or initial-risk units, provided the denominator is consistent. For a simple two-outcome model, multiply win probability by average win and subtract loss probability multiplied by average loss. Observed sample averages estimate rather than establish future expectancy.
Example. An illustrative 40% win rate, USD 200 average winner and USD 100 average loser yield USD 20 per trade before costs: 0.40 times 200 minus 0.60 times 100. A separate USD 5 average cost reduces this to USD 15.
Common mistake. Use actual exits and a complete sample. Combining an advertised target ratio with a selected winning streak does not provide a reliable expectancy estimate.
Connect payoff and win rate · Assess signal records
Reference: Van Tharp Institute: R-multiples and expectancy.
An exponential moving average is a recursive average that applies more weight to recent observations. A common convention uses a smoothing factor of 2 / (period + 1). The updated value is the previous EMA plus that factor multiplied by the difference between the new price and previous EMA. Initialisation also matters.
Example. For a five-period EMA, the factor is one third. If the previous EMA is 102 and the new completed close is 108, the updated EMA is 104: 102 plus one third of six.
Common mistake. Two charts can disagree despite displaying the same period if their price feed, seed, history or bar boundaries differ. A quicker response than an SMA does not establish better trading performance.
Check moving-average assumptions
Reference: Fidelity: exponential moving average.
L
Leverage describes exposure relative to the capital supporting it. In a simplified flat-rate model, a 5% margin requirement corresponds to 20:1 exposure relative to required margin. Actual exposure relative to total account equity is a different ratio. Larger exposure makes a given market movement produce a larger cash gain or loss.
Example. USD 20,000 of exposure backed by USD 1,000 required margin uses 20:1 leverage against that margin. If account equity is USD 5,000, the same position is only 4:1 relative to total equity.
Common mistake. Changing the permitted leverage does not change a fixed position's loss per pip. Cash stop risk depends on quantity, price distance and execution, while account and broker margin constraints still matter.
Compare margin and leverage
Reference: IG: leverage and margin.
A limit order specifies the worst acceptable execution price: a buy can fill at the limit or lower, and a sell at the limit or higher. Execution is conditional on matching and availability; placing the order does not guarantee a fill. Its expiry and partial-fill handling also belong to the order specification.
Example. A hypothetical EUR/USD buy limit of 1.1000 cannot properly fill at 1.1002 under that limit instruction. It may fill at 1.1000 or a lower price, or remain unfilled if the required liquidity is unavailable.
Common mistake. A candle touching a level does not establish that your order filled. The chart's price side, available quantity and order priority matter; retrospective strategy examples should state their fill assumptions.
Specify reproducible entry rules
Reference: SEC Investor.gov: order types.
Liquidity describes the ability to trade a particular quantity promptly without a large price concession. It depends on available buying and selling interest at relevant prices, not simply on whether a market is open. Conditions can vary across venues, times and order sizes. A liquid market for one quantity may be less accommodating for another.
Example. If only 10,000 units are available to buy at an ask of 1.1000, a 30,000-unit order may require additional higher-priced liquidity. The best displayed quote therefore need not describe the average price for the entire order.
Common mistake. An active session label is not proof of deep liquidity at your broker. News, holidays and market transitions can change spreads and execution conditions even in widely traded instruments.
Understand forex sessions · Review event preparation
Reference: IG: market liquidity.
Look-ahead bias occurs when a historical decision uses information that was unavailable at the decision time. Common sources include future candle values, indicators confirmed later and revised economic data substituted for the original release. Correct arithmetic does not repair the timing error; every input needs an availability timestamp consistent with the simulated decision.
Example. A swing rule requiring two bars to the right cannot label the middle bar as confirmed when it closes. The confirmation becomes available only after those later bars complete, so any decision must wait.
Common mistake. Plotting a confirmed marker back on an earlier candle can be visually useful but misleading in a test. Separate the time being described from the time the information actually became usable.
Avoid future information in price structure · Specify strategy timing
Reference: QuantConnect: parameter selection and look-ahead bias.
A lot is a platform's standard quantity for an instrument. A common retail forex convention uses 100,000 units of base currency per standard lot, with 0.10 lot representing 10,000 units and 0.01 lot representing 1,000 units. Some platforms instead accept an explicit number of units. Available increments and minimum sizes are contract details.
Example. Under that convention, 0.25 lot of EUR/USD represents EUR 25,000. With a 0.0001 pip size, each pip changes the position's value by USD 2.50 before costs.
Common mistake. The same lot number can represent very different exposure in forex, gold and indices. Read the symbol specification before entering a quantity, especially when switching account types or platforms.
Apply lot-size calculations · Check gold contract units
Reference: OANDA: forex units and trading hours.
M
Moving average convergence divergence, or MACD, compares a faster and slower exponential moving average. In the common 12, 26, 9 convention, the MACD line is the 12-period EMA minus the 26-period EMA; its signal line is a nine-period EMA of that difference. The histogram is MACD minus the signal line.
Example. If MACD is -0.0020 and its signal line is -0.0030, the histogram is +0.0010. A positive histogram can therefore coexist with a MACD line below zero; the two comparisons answer different questions.
Common mistake. Do not confuse a signal-line crossover with a zero-line crossover. Parameters, source price and bar completion affect the values, while any resulting entry rule still needs independent evaluation after costs.
Understand MACD lines and histogram
Reference: Fidelity: MACD.
Margin is collateral required to open or maintain a leveraged position. It is not a trading fee and does not automatically cap losses. Broker calculations can depend on product, exposure tiers, account currency and account rules. Falling equity or increased requirements can reduce available margin and lead to position closure under the applicable agreement.
Example. Under an illustrative flat 5% model, USD 30,000 notional exposure requires USD 1,500 margin. A planned stop loss of USD 120 is a separate calculation; neither figure guarantees the eventual realised loss.
Common mistake. Do not assume a warning call will arrive before liquidation. Know the account's closeout threshold and valuation method, and check current requirements directly before relying on a calculator estimate.
Understand margin requirements
Reference: IG: leverage and margin.
A market order requests execution at available prices rather than setting a specific limit price. Its purpose is prompt execution, subject to market access, available liquidity and the venue's rules. The last displayed price is not a promise of the fill, and a large order can receive several fills at different prices.
Example. Suppose a hypothetical buy fills 10,000 units at 1.1000 and another 10,000 at 1.1002. The quantity-weighted average entry is 1.1001, halfway between the two prices because the quantities are equal.
Common mistake. Submitting an order is not proof that it was accepted or fully executed. Check its acknowledgement, filled quantity and remaining status before sending another instruction that could accidentally increase exposure.
Specify entries and execution · Account for price and costs
Reference: CME Group: order instructions and execution.
N
Nonfarm payrolls usually refers to the US establishment survey's measure of paid jobs outside farming, often discussed as its monthly change. It is part of the Employment Situation release. The unemployment rate comes from the separate household survey, which has different coverage and counts people rather than payroll jobs in the same way.
Example. A hypothetical current-month payroll gain of 180,000 against a 150,000 forecast is a positive 30,000-job surprise. Downward revisions totalling 40,000 to earlier months are separate information and should be recorded alongside it.
Common mistake. A stronger headline does not guarantee a stronger dollar. Revisions, wages, participation, expectations and the broader policy context can pull interpretation in different directions; read the release rather than only its calendar colour.
Read the full employment release
Reference: BLS: payroll and household survey differences.
Notional value measures the underlying economic exposure represented by a position. For a simple gold contract quoted per ounce, multiply ounces per contract, number of contracts and price per ounce. Notional is useful for comparing scale, but it is distinct from required margin, deposited cash and the loss associated with a particular stop distance.
Example. A hypothetical position covering 20 ounces of gold at USD 2,500 per ounce has USD 50,000 notional exposure. A USD 10-per-ounce movement changes its price value by USD 200, regardless of the initial margin.
Common mistake. Do not treat the margin deposit as the whole exposure. Conversely, notional alone does not specify the likely loss, holding-period costs, exit price or terms of account protection.
Separate exposure and margin · Read gold specifications
Reference: CME Group: contract notional value.
O
Out-of-sample testing evaluates a frozen specification on observations not used to develop or select it. For time-series trading work, preserving chronological order helps prevent future information from entering earlier decisions. The test's value depends on keeping it separate from tuning, including discretionary changes motivated by seeing its results.
Example. A hypothetical researcher develops rules on 2021-2022, fixes them, then evaluates 2023 without changing the rules. If they subsequently adjust the strategy to repair 2023 losses, that period has become part of development for the revised version.
Common mistake. An unused date range is not automatically independent if it helped choose the strategy indirectly. Report the research sequence and full results; one held-out period still cannot guarantee future performance or stable execution.
Separate development and evaluation · Assess evidence behind signals
Reference: QuantConnect: overfitting and held-out data.
Overfitting means adapting a model so closely to the quirks of a development sample that its apparent strengths may not generalise. It can arise from many parameter trials, repeated discretionary changes or selecting only favourable instruments and dates. Even a simple rule can be overfit when the research process repeatedly selects it from many alternatives.
Example. If a researcher tests 500 combinations and presents only the best, that selected result has benefited from 499 hidden comparisons. It deserves a different interpretation from one specification written before any results were examined.
Common mistake. More optimisation does not automatically mean better evidence. Keep a record of variants, examine sensitivity to nearby settings and reserve genuinely untouched data. An attractive historical fit does not establish a durable trading edge.
Assess strategy evidence
Reference: QuantConnect: overfitting and held-out data.
P
A pip is a conventional forex price increment. For many pairs it is 0.0001 of the quote currency per unit of base currency; for many yen-quoted pairs it is 0.01. A pipette is one tenth of a pip. These conventions help compare price distances without confusing them with a platform's extra decimal places.
Example. EUR/USD moving from 1.10000 to 1.10250 travels 25 pips, or 250 pipettes. USD/JPY moving from 150.00 to 150.25 also travels 25 pips under the 0.01 convention.
Common mistake. A gold or index platform may use the word pip differently. Check that instrument's tick size and contract units rather than applying a forex decimal rule to every symbol.
Calculate stop distances · Understand yen pip values
Reference: OANDA: pips and price increments.
Pip value is the cash change associated with a one-pip move for a specified position. For a straightforward forex position, base-currency units multiplied by pip size gives pip value in the quote currency. Converting that figure into account currency can make the account-currency value change as exchange rates move.
Example. For 10,000 units of USD/JPY and a 0.01 pip size, one pip is JPY 100. At an illustrative conversion rate of JPY 150 per USD, that is approximately USD 0.67 before conversion charges.
Common mistake. USD 10 per pip is not a universal lot value. It fits certain position sizes and quote currencies. Record the units, quote currency and conversion rate whenever comparing two instruments.
Calculate JPY pip value · Size EUR/USD positions
Reference: OANDA: AUD/JPY pip calculations.
Position sizing chooses quantity from a stated cash-risk budget and an explicit trade model. A simple starting point divides the budget by the modelled loss per unit at the intended exit. Practical sizing also accounts for separate costs, conversion, minimum quantities and permitted increments. The resulting number is a planning estimate, not an execution guarantee.
Example. A USD 100 illustrative budget, 25-pip stop and USD 10 per pip per lot give 0.40 lot before extra costs: 100 divided by 250. Reserving a separate fixed USD 5 reduces that model to 0.38 lot.
Common mistake. Rounding upward can exceed the budget. If the permitted minimum already exceeds the calculated quantity, forcing the trade into that minimum changes the plan's stated risk.
Size positions including costs
Reference: CME Group: position sizing.
R
An R-multiple expresses a trade's realised outcome relative to a fixed, recorded initial risk amount. If the initial planned risk is one R, dividing the outcome by that amount makes differently sized trades easier to compare. State whether the numerator and initial budget include costs so that the measurement remains consistent.
Example. With initial planned risk of USD 80, a net USD 120 gain is +1.5R. A net USD 100 loss is -1.25R. The larger-than-planned loss could reflect slippage or other differences between the plan and the actual outcome.
Common mistake. Do not move the denominator after seeing the result or assume losses cannot exceed -1R. An average R-multiple describes a sample, while position sizes, sequencing and compounding still affect the account.
Record payoffs consistently · Understand recovery arithmetic
Reference: Van Tharp Institute: R-multiples and expectancy.
RSI is an oscillator calculated from average upward and downward price changes. Under the usual formula, RS equals average gain divided by average loss, and RSI = 100 - 100 / (1 + RS). Wilder-style smoothing and initialisation distinguish the standard calculation from a simple rolling average of recent changes.
Example. With average gain of 1.5 and average loss of 0.5, RS is three and RSI is 75. The figure describes the supplied price history; it is not a 75% probability of any future event.
Common mistake. Overbought and oversold labels refer to chosen thresholds, commonly 70 and 30. They do not mean price must reverse immediately, and RSI can remain beyond a threshold during a sustained trend.
Calculate and interpret RSI
Reference: Fidelity: relative strength index.
Reward-to-risk compares a planned gain with a planned loss under stated prices and costs. This glossary writes reward first: a possible USD 200 gain against a USD 100 loss is 2:1 reward-to-risk. Some sources reverse the order and call the same relationship 1:2 risk-to-reward, so the labels matter.
Example. With only two exact outcomes, gaining USD 200 or losing USD 100, the gross break-even win rate is 100 divided by 300, or approximately 33.33%. Costs and different exit outcomes change that calculation.
Common mistake. A distant target can improve the displayed ratio without making it likely to be reached. A planned ratio is not an observed average payoff or evidence of positive expectancy.
Understand ratios and break-even arithmetic
Reference: IG: risk and reward.
S
A simple moving average is the arithmetic mean of a chosen number of observations, often completed closing prices. Each observation in the window has equal weight. As a new bar arrives, the oldest observation leaves the window. An SMA smooths past data; its period refers to bars, so the same number means different horizons on different charts.
Example. Three hypothetical closes of 100, 102 and 104 produce an SMA of 102. If the next close is 108, the three-close window becomes 102, 104 and 108, averaging approximately 104.67.
Common mistake. A price crossing its average is an observation, not a guaranteed trade outcome. Repeated crossings can occur in a range, and an unfinished bar can change the apparent signal.
Compare SMA and EMA calculations
Reference: Fidelity: simple moving average.
Slippage is the difference between a stated reference price and an actual execution price. It can be favourable or adverse. A meaningful measurement names the reference, such as the quote when an order was submitted, and the direction of the trade. Fast price changes and limited available quantity can influence fills.
Example. For a buy referenced to 1.1000, execution at 1.1003 is three pips worse when one pip is 0.0001. On 10,000 units of EUR/USD, that difference adds USD 3 to the purchase cost.
Common mistake. Spread and slippage are different concepts. Comparing a buy fill with a bid-only chart can mistakenly label the spread as slippage. Preserve timestamps and bid/ask observations when reviewing executions.
Model execution costs · Study breakout execution
Reference: IG: slippage mechanics.
The bid-ask spread is the distance between the available selling and buying quotes. It is a trading cost that can change with conditions, account terms and instrument. Express it in price units first, then convert to pips or cash using the correct specification and position size. A tight displayed spread alone does not describe every cost.
Example. A EUR/USD bid of 1.1050 and ask of 1.10512 differ by 0.00012, or 1.2 pips when one pip is 0.0001. At 20,000 units, that gap corresponds to USD 2.40.
Common mistake. If profit or loss already uses the actual ask entry and bid exit, the spread is already reflected. Subtracting that same spread again would double-count it; separate commission may still apply.
Include trading costs correctly
Reference: OANDA: bid and ask prices.
A stop-loss order is an exit instruction triggered under specified price conditions. An ordinary stop generally becomes a marketable order once triggered, so its execution price can differ from the trigger. Broker and venue rules determine the trigger reference, supported order types and treatment during gaps. A guaranteed stop, where available, has separate terms.
Example. A hypothetical long entered at 1.1050 with a stop trigger at 1.1025 has a planned 25-pip distance. A fill at 1.1020 instead produces 30 pips of price loss, before any separate charges.
Common mistake. Do not describe the trigger as an assured maximum loss. A stop-limit order introduces a price limit but can remain unfilled, leaving exposure open when the market moves beyond that limit.
Measure stop distance and limitations
Reference: SEC Investor.gov: order types.
Support and resistance describe price areas where a trader observes or anticipates a reaction based on stated evidence. They may be drawn from prior turning points, ranges or a declared indicator rule. The boundaries and timeframe should be fixed before evaluating the next reaction so that an unsuccessful observation is not silently redrawn.
Example. A hypothetical hourly resistance zone from 1.1050 to 1.1060 is 10 pips wide. A study could separately record touches, completed closes above 1.1060 and subsequent returns inside the zone. Those are different events.
Common mistake. A visible level is not a barrier guaranteed to hold. Choosing only the cleanest historical bounces after seeing their outcomes overstates how useful that level was in advance.
Draw zones with explicit rules
Reference: CME Group: support and resistance.
Retail platforms often use swap or financing to describe an adjustment for carrying a position across a specified daily cutoff. The amount can be a debit or credit and depends on instrument, direction, provider rates and account terms. Settlement calendars can cause one posting to cover several days, including weekends or holidays.
Example. If a hypothetical account charges USD 2 per day for a particular position and a posting covers three days, that adjustment is a USD 6 debit. This is arithmetic only, not a quoted rate or universal weekly schedule.
Common mistake. Do not assume the charge occurs on the same weekday for every product, or that a positive interest-rate difference guarantees a credit after provider adjustments. Check the current contract schedule.
Compare holding-period costs · Understand gold products
Reference: OANDA: financing costs and settlement.
T
Tick size is the permitted minimum price increment for a specified instrument or venue. Tick value is the cash effect of that increment for a specified contract quantity. In other contexts, tick can mean a recorded quote update or trade, which is a different use of the word. Always identify which meaning applies.
Example. For a hypothetical contract representing 100 ounces with a USD 0.10-per-ounce tick size, one tick is worth USD 10 per contract. Two contracts moving three ticks change price value by USD 60 before costs.
Common mistake. A platform's displayed decimals do not by themselves establish cash tick value. Contract size, currency and quantity are also needed, and a tick should not automatically be treated as a forex pip.
Connect gold units and increments · Calculate gold cash outcomes
Reference: CME Group: tick movements.
A trading session is a defined time window associated with an exchange, broker or financial centre. Forex labels such as London and New York are useful reference windows in a decentralised market, rather than one universal opening bell. Instrument availability, daily maintenance and holiday hours come from the relevant provider's schedule.
Example. A reference window beginning at 08:00 London local time starts at 08:00 UTC during GMT and 07:00 UTC during British Summer Time. The local time is unchanged while its UTC representation shifts.
Common mistake. Fixed UTC tables can become wrong around daylight-saving transitions. The UK and US do not always change clocks on the same dates, and an open reference session does not prove that a particular instrument is currently tradable.
Use timezone-aware session hours
Reference: OANDA: instrument trading hours.
A trend describes directional behaviour over a chosen interval and according to a chosen rule. One approach tracks successive confirmed swing highs and lows; another uses a moving average's slope. These descriptions need not agree, and an hourly upward trend can contain a five-minute decline without either observation being logically inconsistent.
Example. Under a rule requiring two completed lower highs on each side, a proposed swing high cannot be confirmed until the second bar to its right has finished. An analysis using it earlier would rely on future information.
Common mistake. The phrase trade with the trend is incomplete without timeframe, confirmation and exit rules. Recognising a historical direction does not establish that the next move will continue or provide an entry price.
Describe price structure · Specify a trend study
Reference: CME Group: technical analysis and trends.