Terminology

Price Action Model Terminology

To effectively use the Price Action Model, it's important to understand the core concepts and vocabulary it relies on.

ATR (Average True Range)

A technical indicator that measures market volatility by decomposing the entire range of an asset price for that period. It is used in this model to calculate objective, volatility-adjusted trailing stops and take-profit targets. This ensures that stops are placed dynamically outside of typical market noise, rather than at arbitrary fixed pip or percentage distances, which adapts the strategy seamlessly across different pairs and market conditions.

BOS (Break of Structure)

A continuation of the current market structure after a CHoCH has already occurred. It confirms that the newly established trend is continuing. In an uptrend, a BOS occurs when price breaks above a previous higher high, whereas in a downtrend, a BOS happens when price breaks below a previous lower low. Multiple BOS signals indicate strong momentum in the current direction.

Buy-Side Liquidity (BSL)

Liquidity resting above previous pivot highs. Smart money often targets BSL to execute large sell orders. Retail traders typically place their stop-losses (buy-to-cover orders) or breakout buy orders above these obvious resistance levels. When price pushes into BSL, it provides the necessary liquidity for institutional players to build short positions.

CHoCH (Change of Character)

The first significant break in market structure, indicating a potential reversal in the current trend. It shows that the opposing side (buyers or sellers) is stepping in with enough volume to break the previous pivot. For example, if the market has been making lower lows and lower highs (downtrend), a break above the most recent lower high signals a bullish CHoCH, hinting that buyers are taking control.

FVG (Fair Value Gap)

An imbalance in price action created when buying or selling pressure is so strong that it leaves a gap (or inefficiency) between the wicks of adjacent candles. These gaps act as magnets and are often mitigated later by price. The market naturally tends to return to these areas to rebalance the order flow before continuing in its primary direction, making FVGs excellent entry points or targets.

HTF (Higher Timeframe)

A timeframe larger than your current execution chart (e.g., 4H on a 15m chart), used for understanding broader market context and narrative. Trading in the direction of the HTF drastically improves win rates, as it aligns your smaller trades with the major underlying order flow and institutional bias.

Liquidity

Areas on the chart where a large concentration of stop-loss orders or pending breakout orders exist. These are typically found above old highs or below old lows. In modern trading concepts, liquidity is considered the fuel that drives market movement; price moves from one pool of liquidity to another to fill large institutional orders.

Liquidity Sweep (S-Area)

An event where price temporarily moves past a previous pivot high or low, triggering the resting liquidity (stop-losses), before aggressively reversing in the opposite direction. Also known as a turtle soup or stop hunt, this manipulation tactic traps retail breakout traders and stops out early participants, creating a highly favorable environment for smart money reversals.

LTF (Lower Timeframe)

The current timeframe you are executing your trades on. It is used to find precise, low-risk entries, often after a specific HTF narrative (such as sweeping an HTF liquidity pool or tapping into an HTF FVG) has been fulfilled.

Pivot Points

Specific highs and lows on the chart, calculated over a defined lookback period, used to determine where structure breaks and liquidity pools exist. The accuracy of identifying true market structure relies heavily on properly identifying these pivot highs (swing highs) and pivot lows (swing lows).

Sell-Side Liquidity (SSL)

Liquidity resting below previous pivot lows. Smart money often targets SSL to execute large buy orders. Retail traders typically place their sell-stop orders (stop-losses for longs, or breakout shorts) below these obvious support levels. Pushing price into SSL allows large institutions to accumulate long positions seamlessly.