Glossary: Elliott Wave and Smart Money terms

By AnalytikCapital · Updated October 3, 2026

This glossary defines, in plain English, the Elliott Wave, Smart Money Concepts and trading-plan terms used on AnalytikCapital, and notes how the engine applies each one where that differs from common usage.

A

Alternation The tendency of waves 2 and 4 of an impulse to differ, one sharp and one sideways, or one quick and one slow. It is a guideline, not a rule: the engine rewards it in scoring but never rejects a count for lacking it. See Elliott Wave basics.

Average true range (ATR) A volatility measure: the average size of recent bars, including any gap from the previous close. AnalytikCapital measures swings, zone widths, stops and targets in ATR so the same rules work on calm and volatile markets. See the methodology.

B

Balanced price range (BPR) The price area where a bullish and a bearish fair value gap overlap. Because it belongs to both sides, the plan engine never uses a BPR alone as an entry. See order blocks and fair value gaps.

Break of structure (BOS) A candle body closing beyond the most recent swing in the direction of the trend, which confirms the trend continues. A wick beyond the swing is not enough. See market structure.

C

Change of character (CHoCH) The first close beyond the protected swing on the opposite side of the trend, the earliest sign that the trend may be turning. Usage varies between teachers; AnalytikCapital calls it a CHoCH when the breaking candle is ordinary and a market structure shift when it is strong. See market structure.

Confirmed label A wave label whose pattern is complete and from which price has moved away durably. The plan engine trades against the finished move when the last label is confirmed. See the methodology.

Corrective wave A move against the larger trend, usually in three parts (A-B-C) or in a five-part triangle. Zigzags, flats and triangles are the main corrective shapes. See Elliott Wave basics.

D

Dealing range The current swing range, from the latest swing low to the latest swing high in the trend direction, used to split price into premium and discount. See Smart Money Concepts.

Degree The size class of a wave. AnalytikCapital keeps three relative degrees, major, medium and minor, tied to the timeframe you chose and the ones above and below it. Plans are built on the medium degree. See the methodology.

Diagonal A five-wave wedge in which wave 4 overlaps wave 1, usually at the start or end of a larger move. The engine defines ending diagonals but keeps them switched off by default until they pass its benchmark. See Elliott Wave basics.

Displacement A strong, fast candle, measured in AnalytikCapital as a body larger than 1.5 times the ATR. Order blocks are only marked behind breaks made with displacement. See order blocks.

E

Elliott Wave Principle The idea that market swings unfold in recognizable patterns: five waves with the trend and three against it, repeating at every scale. See Elliott Wave basics.

Entry zone The price band in which a plan expects to be filled. In AnalytikCapital it is the overlap of a Smart Money zone with the Elliott retracement band, not either one alone. See the methodology.

Equal highs and equal lows (EQH, EQL) Two or more swing highs, or lows, at nearly the same price. Stops tend to rest just beyond them, so they act as liquidity targets. See liquidity and killzones.

Equilibrium The 50% midpoint of the dealing range, dividing premium from discount. See Smart Money Concepts.

Extension A Fibonacci multiple of an earlier wave, used to project how far the next wave may travel, for example 161.8% of wave 1 for wave 3. See Fibonacci ratios.

F

Fair value gap (FVG) A three-candle imbalance in which the first and third candles do not overlap, leaving a price range the middle candle crossed in one move. See order blocks and fair value gaps.

Fibonacci retracement How far a move gives back of the move before it, expressed as a ratio such as 38.2%, 50% or 61.8%. Ratio sets differ between sources; the engine’s set is listed in Fibonacci ratios.

Flat A sideways correction in three parts (3-3-5) in which wave B retraces most or all of wave A. Variants are regular, expanded and running. See Elliott Wave basics.

Fractal (swing) A bar whose high is above the highs on both sides, or whose low is below the lows on both sides. The Smart Money engine uses the three-candle version to mark swings. See market structure.

I

Impulse A five-wave move with the trend. Three rules apply: wave 2 does not pass the start of wave 1, wave 3 is not the shortest of waves 1, 3 and 5, and wave 4 does not enter wave 1’s price range. See Elliott Wave basics.

Inversion fair value gap (IFVG) A fair value gap that price has closed fully through, after which it is treated as support or resistance from the other side. See order blocks and fair value gaps.

Invalidation price The level at which a wave count stops being valid, such as the start of wave 1 for an impulse. See the methodology.

K

Killzone A session window when activity tends to concentrate: Asian, London, New York and London close, on New York time. AnalytikCapital shows them only on charts of one hour or less. See liquidity and killzones.

L

Liquidity Clusters of resting orders, often stops, above highs and below lows. Smart Money Concepts treats them as magnets for price. See liquidity and killzones.

Liquidity sweep A wick that runs through a liquidity level while the candle body closes back on the original side. See liquidity and killzones.

M

Market structure shift (MSS) A change of character made by a strong, displacement candle. Some sources use MSS and CHoCH as synonyms; AnalytikCapital separates them by candle strength. See market structure.

Market time (ET) US Eastern Time, the single clock AnalytikCapital uses for every timestamp, whatever the asset. See markets.

Mitigation Price returning into an order block or gap. A mitigated zone may still hold; a zone that price closes through is invalidated. See order blocks.

O

Order block The last opposite-colored candle before a strong move that breaks structure, treated as a zone where large orders were placed. Definitions vary (some group several candles); the engine uses one candle. See order blocks and fair value gaps.

P

Pivot A turning point, swing high or swing low, from which waves are drawn. The Elliott engine finds pivots with a ZigZag filter scaled by ATR. See the methodology.

Premium and discount The upper and lower halves of the dealing range. Smart Money Concepts prefers buying in discount and selling in premium, and the plan engine enforces it. See Smart Money Concepts.

Previous day and week highs and lows (PDH, PDL, PWH, PWL) The high and low of the last completed daily and weekly bar, watched as liquidity levels and used as possible targets. See liquidity and killzones.

R

Regular trading hours (RTH) The main exchange session for US equities, as opposed to pre-market and after-hours trading. Published equity plans use the RTH series. See markets.

Rejection reason code The stable code the plan engine returns when no plan qualifies, such as direction_conflict or stop_too_wide. See the full table in the methodology.

Risk-to-reward (R:R) The distance to a target divided by the distance to the stop, written in multiples of R (one unit of risk). AnalytikCapital measures it from the worst fill in the entry zone. See the methodology.

S

Smart Money Concepts (SMC) A way of reading charts around where large participants are assumed to act: structure breaks, order blocks, gaps and liquidity. Much of its vocabulary comes from ICT (Inner Circle Trader) teaching; names and definitions vary between sources. See Smart Money Concepts.

Stop loss The price at which a plan is wrong and the position is closed. The engine places it beyond the farther of the zone edge and the Elliott invalidation, plus a buffer. See the methodology.

T

Take profit (TP1, TP2, TP3) Target levels, nearest first. AnalytikCapital only uses real chart levels, such as liquidity or opposite zones, never round numbers. See the methodology.

Tentative label A wave label whose pattern is not yet finished, so the last pivot can still move. A tentative tail is a tentative stretch with no rule-valid pattern behind it, and the plan engine will not trade it. See the methodology.

Triangle A five-part sideways correction (A-B-C-D-E) whose boundaries converge (contracting) or widen (expanding). See Elliott Wave basics.

V

Validity window The time span in which a published plan’s entry may fill. If price does not reach the zone in time, the plan expires; a plan that filled runs on to its stop or target. See the methodology.

Z

ZigZag filter A method that ignores price moves smaller than a threshold and keeps only significant swings. AnalytikCapital scales the threshold with ATR. See the methodology.

Zigzag (pattern) A sharp three-part correction (5-3-5) in which wave B stays short of the start of wave A. Not to be confused with the ZigZag filter. See Elliott Wave basics.

Every term here is applied by AnalytikCapital’s engines as described in the methodology.

Educational content, not financial advice. Trading involves substantial risk of loss.