Price action is the art of reading raw price movements on a chart — no indicators, no oscillators, just the pure language of the market. Every candlestick, every level, every breakout tells a story. This glossary gives you the vocabulary to read it.
Trading involves risk. Binary options and forex trading involve substantial risk of losing your capital. This glossary is for educational purposes only. Never trade money you cannot afford to lose.
How to Use This Glossary
Each term includes a plain-English definition, a real trading example, and a link to a detailed guide. Terms are ordered from foundational concepts to more advanced setups.
Price Action Terms
Breakout
A breakout happens when price moves beyond a established support or resistance level with increased momentum. It signals that one side (buyers or sellers) has overwhelmed the other. A breakout is confirmed when price closes beyond the level — not just spikes through it. False breakouts (fakeouts) are common, so confirmation is key (learn our breakout strategy →).
Example: EUR/USD has been ranging between 1.0850 and 1.0900 for 3 hours. Price suddenly jumps to 1.0915 and holds above 1.0900 for 2 consecutive candles — a confirmed breakout. You enter a CALL with the expectation that the range is over.
Pullback
A temporary move against the main trend before the trend resumes. In an uptrend, a pullback is a short-term price decline (lower than the previous candle but still above key support). Pullbacks are the best entry points for trend traders — you buy the dip in an uptrend, sell the rally in a downtrend. The key is distinguishing a pullback from a true reversal (learn to trade pullbacks with trendlines →).
Retracement
Similar to a pullback but often refers to deeper counter-trend moves measured by Fibonacci levels. A retracement can be 23.6%, 38.2%, 50%, or 61.8% of the original move. Fibonacci retracement levels are popular tools for identifying where a pullback might end and the trend resume (learn our Fibonacci strategy →).
Example: GBP/USD rallies from 1.2600 to 1.2800 (200 pips), then pulls back to 1.2724 — exactly the 61.8% Fibonacci retracement level. Price bounces from there and continues higher. The retracement at Fib level confirmed the trend is still intact.
Consolidation
A period when price moves sideways between support and resistance — also called “ranging” or “sideways” market. Volume typically drops during consolidation. This is the market catching its breath before the next move. Most technical indicators (RSI, MACD, Stochastic) give false signals during consolidation. The best move is often to wait for the breakout (learn the Bollinger Bands squeeze strategy for consolidations →).
Example: USD/JPY trades between 148.50 and 149.00 for 4 hours on the 5-minute chart. RSI hovers around 50. No clear signal — this is consolidation. Wait for price to break above 149.00 or below 148.50 before trading.
Fakeout (False Breakout)
When price briefly breaks through a support or resistance level but immediately reverses back inside the range. Fakeouts trap traders who enter on the initial breakout. They’re more common than you’d think — especially around major round numbers (1.1000, 1.2000, etc.). The best defense is to wait for a confirmed close beyond the level, not just a spike (see how to avoid fakeouts →).
Example: Gold spikes to $2,360, breaking above resistance at $2,355 — then immediately drops back to $2,350 within 2 candles. Traders who bought the breakout are now trapped. The fakeout shows sellers are still defending that level.
Momentum
The strength or speed of a price move. High momentum = large candles with small wicks, moving quickly in one direction. Low momentum = small candles with long wicks, price struggling to move. Momentum tells you whether the current move has energy behind it or is running out of steam. Indicators like RSI and MACD measure momentum mathematically, but you can read it directly from candle size and speed (learn how RSI measures momentum →).
Exhaustion
When a trend runs out of energy and shows signs of reversing. Signs of exhaustion: long wicks in the direction of the trend (buyers pushing but getting rejected), a series of small candles after a run of large candles, and momentum divergence (price making higher highs but RSI making lower highs). Exhaustion is your cue to prepare for a reversal, not chase the trend (learn to spot exhaustion with RSI divergence →).
Price Action Cheat Sheet
Next Steps
Now that you understand price action terms, here’s what to learn next:
Support and Resistance Strategy → — Master the foundation of all price action trading.
Trendline Trading Strategy → — Learn to draw and trade dynamic support and resistance.
Candlestick Patterns Glossary → — Learn the building blocks of price action.
Trading involves substantial risk of losing your capital. This glossary is for educational purposes only. Past performance does not guarantee future results. Always do your own research before trading.
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