Learn · Glossary
Trading words, plainly.
88 terms in short, plain English.
88 terms
A
- ASIC
- The Australian Securities and Investments Commission.
- Ask
- The price you buy at. Always a little higher than the bid.
B
- Balance
- Your account money from closed trades, not counting open positions.
- Base currency
- The first currency in a pair. In EUR/USD it's the euro.
- Bid
- The price you sell at. Always a little lower than the ask.
C
- CFD
- Contract for difference. You trade the price change without owning the asset.
- CPI
- Consumer price index, a measure of inflation.
- Candlestick
- A chart bar showing open, high, low and close for a period.
- Challenge
- A prop firm's paid evaluation with a profit target and loss limits.
- Clone firm
- A scam that copies a real firm's name, licence number or website.
- Commission
- A fee per lot traded, common on raw-spread accounts.
- Consistency rule
- A prop rule that limits how much of your profit can come from one day.
- Correlation
- How closely two prices move together, from -1 (opposite) to +1 (same).
- Cross pair
- A pair without the US dollar, like EUR/GBP.
- Currency pair
- Two currencies quoted against each other, such as GBP/USD.
- Currency strength
- How a currency has moved against a basket of others over a period.
- CySEC
- The Cyprus Securities and Exchange Commission, an EU regulator.
- cTrader
- A trading platform from Spotware, often offered on raw-spread accounts.
D
- Daily drawdown
- How much you've lost within one trading day. Prop firms often cap it.
- Drawdown
- How far your account has fallen from a previous high.
E
- ECN
- A model where orders are matched with other market participants or liquidity providers.
- Economic calendar
- A schedule of data releases and central bank events.
- Equity
- Balance plus or minus the profit or loss on open trades.
- Exotic pair
- A pair with a smaller or emerging-market currency, like USD/ZAR. Usually wider spreads.
- Expectancy
- The average result per trade over many trades.
- Expert advisor
- An automated trading program for MetaTrader.
F
- FCA
- The UK's Financial Conduct Authority.
- FSCA
- South Africa's Financial Sector Conduct Authority, which licenses brokers as FSPs.
- FSP
- Financial services provider: a firm authorised by the FSCA.
- Free margin
- Equity left over that isn't tied up as margin.
- Fundamental analysis
- Studying economic data, policy and news.
G
- Gap
- A jump in price between one close and the next open, often over weekends.
H
- Hedging
- Holding positions that offset each other's risk.
I
- Interest rate decision
- A central bank's announcement on its policy rate.
K
- KYC
- Know your customer: identity checks a broker must run.
L
- Leverage
- Borrowed exposure. 1:100 means $1 of margin controls $100 of position.
- Limit order
- An order to buy below, or sell above, the current price.
- Liquidity
- How easily something can be bought or sold without moving its price.
- Long
- A buy position. You gain if the price rises.
- Lot
- A trade size unit. 1 standard lot = 100,000 units of the base currency.
M
- Major pair
- A pair that includes the US dollar and another big currency, like EUR/USD or USD/JPY.
- Margin call
- A warning that your margin level has fallen to the broker's threshold.
- Margin level
- Equity divided by used margin, as a percentage.
- Margin
- The money set aside to keep a leveraged position open.
- Market maker
- A broker that takes the other side of client trades.
- Market order
- An order to buy or sell straight away at the best available price.
- Maximum drawdown
- The biggest peak-to-low fall over a period.
- MetaTrader
- MT4 and MT5, widely used trading platforms from MetaQuotes.
- Micro lot
- 0.01 lot, or 1,000 units.
- Mini lot
- 0.1 lot, or 10,000 units.
N
- Negative balance protection
- A broker policy that stops your account going below zero.
- Non-farm payrolls
- A monthly US jobs report. Often moves the dollar.
O
- Overlap
- When two sessions are open together. Often the busiest time.
P
- Payout
- A withdrawal of profit share from a funded account.
- Pip
- The standard unit of price movement in FX. 0.0001 for most pairs, 0.01 for yen pairs.
- Pipette
- A tenth of a pip. Shown as the fifth decimal (third on yen pairs).
- Point
- The smallest price step a platform shows. On 5-digit quotes, 10 points = 1 pip.
- Position sizing
- Choosing trade size so a loss at your stop equals the amount you planned to risk.
- Profit split
- The share of profits a funded trader keeps.
- Prop firm
- A company that gives traders simulated or funded capital after an evaluation, for a fee.
Q
- Quote currency
- The second currency in a pair. Prices and P/L are first worked out in it.
R
- R multiple
- A trade's result measured in units of the amount risked. +2R means twice the risk was made.
- Raw spread account
- An account with very tight spreads plus a separate commission.
- Reference rate
- An official daily rate published by a central bank, such as the ECB. Not a tradeable price.
- Requote
- When a broker offers a new price instead of filling your order.
- Resistance
- A price area where selling has tended to appear.
- Risk-reward ratio
- Potential loss compared with potential gain on a trade.
- Rollover
- The daily moment open positions are carried to the next day and swap is applied.
S
- STP
- Straight-through processing: orders passed on to liquidity providers.
- Session
- The main trading hours of a financial centre, like London or New York.
- Short
- A sell position. You gain if the price falls.
- Slippage
- Getting filled at a different price than you asked for, usually in fast markets.
- Spread
- The gap between the bid and ask price. It's the main cost on many accounts.
- Static drawdown
- A loss limit fixed to your starting balance. It doesn't move.
- Stop loss
- An order that closes a trade at a set loss level.
- Stop order
- An order to buy above, or sell below, the current price once it's reached.
- Stop out
- When the broker closes positions automatically because margin level fell too low.
- Support
- A price area where buying has tended to appear.
- Swap
- The overnight interest charged or paid for holding a position past the daily rollover.
- Swap-free account
- An account with no overnight swap, sometimes with an admin fee instead. Also called Islamic account.
T
- Take profit
- An order that closes a trade at a set profit level.
- Technical analysis
- Studying price charts and patterns.
- Timeframe
- The period each candle or bar on a chart covers.
- Trailing drawdown
- A loss limit that moves up as your account makes new highs.
- Trailing stop
- A stop loss that follows the price by a set distance as it moves in your favour.
- Triple swap
- The day swap is charged three times to cover the weekend. Often Wednesday for FX.
V
- Volatility
- How much and how fast a price moves.
W
- Win rate
- The share of trades that closed in profit.
General information, not advice.