Glossary
Trading terms, in plain words.
One term per page, explained in under a minute.
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BalanceThe money recorded in your trading account after completed transactions, deposits, withdrawals, and charges. It generally excludes profits or losses on positions that are still open.Base currencyThe first currency in a currency pair. In EUR/USD, EUR is the base currency. The quoted price tells you how many US dollars one euro costs.Bear marketA period of broadly falling prices. For major stock indexes, a fall of 20% or more from a recent high is a common convention, although the term is used more loosely in other markets.Bid / askThe bid is the quoted price at which you can sell. The ask is the quoted price at which you can buy. The difference between them is the spread.Break-evenThe point where a trade or strategy makes neither a net profit nor a net loss. Trading costs matter, so exiting at your entry price may still leave a small loss.BreakoutA price move beyond an established level or trading range. A breakout can continue or reverse, so crossing a level alone does not guarantee a lasting move.BrokerA firm that provides access to trading or investing services. Depending on the product, it may route your orders to a market or act as the other party to your trade.Bull marketA period of broadly rising prices. The term usually describes a sustained market trend rather than a single strong trading session.
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CandlestickA chart symbol showing the opening, highest, lowest, and closing prices during a chosen period. Its body shows the opening and closing prices, while its wicks show the extremes.CFDA contract for difference is an agreement to settle the change in an asset’s price between opening and closing a position. You do not own the underlying asset. CFDs commonly use leverage, which magnifies gains and losses.CommissionA fee charged for executing a trade. It may be a fixed amount, a percentage of the transaction, or an amount based on trade size.ConsolidationA period when price moves within a relatively limited range. It describes what the market is doing, without establishing which direction it will move next.CorrectionA decline following a price rise. In stock markets, the term commonly refers to a fall of roughly 10% to less than 20% from a recent high, though usage varies.Currency conversion feeA charge for converting money from one currency into another. It may apply when funding an account, withdrawing money, or settling trades in a different currency.Currency pairTwo currencies quoted against each other, such as EUR/USD. The price shows how much of the second currency is needed to buy one unit of the first.
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Day tradingOpening and closing positions within the same trading day. Day traders generally aim to avoid holding positions overnight, although session boundaries vary by market.DrawdownA decline from a previous peak in account value. If equity falls from 10,000 to 9,000, the drawdown is 10%. Check whether a reported figure includes open positions.
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EntryThe transaction that opens a position. Your entry price is the price at which that transaction executes, which may differ from the price you first saw.EquityThe current value of your trading account. In many leveraged accounts, it equals your balance plus unrealised profits and minus unrealised losses, with any relevant adjustments.ExchangeAn organised marketplace where instruments such as shares, options, and futures trade under defined rules. Some products trade directly between counterparties instead.ExitA transaction that closes or reduces a position. An exit can happen through a manual order, an automated order, a contract’s settlement, or a provider’s forced closure.ExpectancyThe average result per trade that a strategy’s statistics imply. A common calculation is win probability multiplied by average win, minus loss probability multiplied by average loss. Costs should be included.ExposureThe amount of market risk attached to a position or portfolio. With leverage, your exposure can be much larger than the margin you provide.
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ForexThe foreign exchange market, where currencies are exchanged. Forex prices are quoted in pairs because buying one currency means selling another.Free marginThe equity available beyond the margin currently required for your open positions. On many platforms, it is calculated as equity minus used margin. Losses can reduce it.
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LeverageA way to control a larger market position with a smaller amount of capital. At 10:1 leverage, 100 can support 1,000 of exposure. Gains and losses reflect the larger position.Limit orderAn instruction to buy at a specified price or lower, or sell at a specified price or higher. It controls the acceptable price, but execution is not guaranteed.LiquidityHow easily an asset can be bought or sold without significantly affecting its price. Low liquidity can lead to wider spreads, partial fills, or less favourable execution.LongA position that generally benefits when the asset’s price rises. Buying an asset or opening a buy position in a derivative are common ways to go long.LotA standardised unit of trade size. In spot forex, a standard lot commonly represents 100,000 units of the base currency. Lot sizes differ across products.
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MACDMoving Average Convergence Divergence is an indicator built from moving averages. Traders use its lines and histogram to examine momentum and trend changes. It can produce misleading signals.MarginThe funds or collateral required to support certain positions. In leveraged retail trading, it is often a fraction of your total exposure. Margin is not a trading fee or a maximum loss.Margin callA demand or notification that an account needs additional funds or reduced exposure to meet margin requirements. Providers may close positions without advance warning, depending on their rules.Margin levelA measure of equity relative to used margin. Many platforms calculate it as equity divided by used margin, multiplied by 100. Providers may use it to determine closure thresholds.Market orderAn instruction to buy or sell at the best available prices when the order reaches the market. It prioritises execution over a specific price and may fill at several prices.Maximum drawdownThe largest peak-to-trough decline during a measured period. It describes the deepest historical drop in the data, without setting a limit on future losses.Moving averageAn indicator that smooths price data over a chosen number of periods. Different methods weight prices differently. Because it uses past prices, it responds after prices change.
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Pending orderAn order waiting for its conditions to be met or for execution. Trading platforms often use the term for entry orders set to activate at a future price.PipA standard unit for describing forex price changes. For most currency pairs, one pip is 0.0001. For many yen pairs, it is 0.01. Its monetary value depends on position size and currencies.Position sizeThe quantity you hold or trade, expressed in units, shares, contracts, or lots. Together with price movement and contract specifications, it determines the financial effect of a trade.Position tradingHolding trades for an extended period, often weeks, months, or longer. The approach generally focuses on broader market developments rather than short-term price movements.Profit factorGross trading profits divided by the absolute value of gross trading losses over a period. Above 1 means profits exceeded losses under that calculation. Check whether trading costs are included.PullbackA temporary move against a recent price trend. It may be followed by a continuation or develop into a larger reversal. That distinction is often clearer afterwards.
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RallyA period of rising prices. A rally can happen within a broader upward or downward trend, so it does not necessarily signal a lasting change in direction.Realised profit/lossA gain or loss recorded when all or part of a position is closed. Whether the displayed figure includes commissions, financing, and other costs depends on the report.ResistanceA price area where upward movement has previously stalled or where traders expect selling interest. It is an observed or anticipated area, not a guaranteed ceiling.ReturnA gain or loss over a period, usually expressed as a percentage of a stated starting value. Comparisons should use consistent treatment of costs, deposits, withdrawals, and leverage.ReversalA change from an upward trend to a downward trend, or the reverse. A brief move against a trend may be a pullback rather than a sustained reversal.Risk per tradeThe amount you plan to put at risk on an individual trade, often expressed as money or a percentage of equity. Actual losses can exceed the estimate because of gaps or slippage.Risk-to-reward ratioA comparison of planned loss with potential profit. Risking 50 to target 100 gives a ratio of 1:2. The ratio alone does not show how likely either outcome is.RolloverCarrying a position into another trading period or replacing an expiring contract with a later one. In retail forex, the term often refers to the daily process associated with overnight financing.RSIThe Relative Strength Index measures the magnitude of recent upward and downward price changes on a scale from 0 to 100. A high reading does not automatically mean price will fall.
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ScalpingA trading approach that aims to capture small price movements through short holding periods. Frequent trading makes transaction costs and execution particularly significant.ShortA position that generally benefits when the asset’s price falls. How it is opened depends on the product. Some short positions can have theoretically unlimited losses as prices rise.SlippageThe difference between an expected or requested execution price and the actual fill price. Slippage can be favourable or unfavourable and is more likely during fast or illiquid markets.SpreadThe difference between the bid and ask prices. If the bid is 100.00 and the ask is 100.05, the spread is 0.05. Spreads can change with market conditions.Stop lossAn order intended to close or reduce a position when price moves against it to a specified level. A standard stop loss does not guarantee the execution price.Stop orderAn order that becomes a market order when its specified stop condition is met. The stop sets the trigger, while the available market prices determine execution.Stop outThe automatic closure of positions when an account falls below a provider’s required margin threshold. The threshold, closure sequence, and execution process depend on the provider.Stop-limit orderAn order that becomes a limit order once its stop condition is met. It controls the acceptable execution price, but it may remain unfilled if the market moves beyond that price.SupportA price area where downward movement has previously stalled or where traders expect buying interest. Price can break through support, so it does not establish a guaranteed floor.SwapIn retail forex and CFD platforms, a label commonly used for an overnight financing adjustment. More broadly, a swap is a derivative contract for exchanging specified cash flows.Swing tradingHolding positions across several sessions, often for days or weeks, to pursue a price swing. Positions held overnight remain exposed to news and market gaps.
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Take profitAn order intended to close or reduce a position at a specified favourable price. Whether it executes depends on market conditions, the relevant quote, and the provider’s order rules.TimeframeThe period represented by each bar or candle on a chart. On a one-hour chart, each candle summarises one hour. It does not necessarily describe your holding period.Trailing stopA stop with a trigger that adjusts as the market moves favourably by a specified amount or percentage. It generally stays in place when price reverses. Execution may differ from the trigger price.TrendThe general direction of price over a chosen period. A market may trend upwards on a daily chart while moving downwards on a shorter chart.
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VolatilityThe degree of price variation over a period. Higher volatility means larger fluctuations, without indicating whether the next move will be upwards or downwards.VolumeThe quantity traded during a period, measured in shares, contracts, or other units. Some forex platforms show tick volume, which counts price updates rather than total market trading.
