Glossary
Forex glossary
Plain-English definitions for 79 trading terms, cross-linked to the guides and calculators. The same glossary is built into the MarketPro app, one tap from any screen.
Short answer
Jump to a letter, or search this page with Ctrl/⌘ + F. Every term links to the guide or calculator that covers it in depth.
A
- Ask
- The price at which you can buy. It is the higher side of the two-sided quote; the difference between it and the bid is the spread.
- ATR
- Average True Range. A measure of how far an instrument typically moves over a period, used to place stops at a distance that reflects current volatility rather than a fixed number of pips.
B
- Base currency
- The first currency in a pair. In EUR/USD the base is EUR, and the quote tells you how many US dollars one euro costs. Buying the pair means buying the base.
- Bid
- The price at which you can sell. The lower side of the two-sided quote.
- Breakout
- Price moving decisively beyond a level that had been containing it. Breakout strategies enter on the move; the recurring problem is the false breakout that immediately reverses.
- Broker
- The firm that gives you access to the market, quotes prices and executes your orders. See the broker hub for what to check before opening an account.
C
- Candlestick
- A chart element showing the open, high, low and close of one period. The body spans open to close; the wicks show the extremes reached and rejected.
- Carry trade
- Holding a position to earn the interest-rate differential between two currencies rather than to profit from the price move. Profitable in calm conditions and prone to violent unwinding when risk sentiment turns.
- Cashback
- A rebate of part of the spread and commission you pay. See forex cashback and the cashback calculator.
- CFD
- Contract For Difference. A derivative that settles the difference between the opening and closing price of an instrument without you owning the underlying asset. Most retail forex, gold and index trading is done through CFDs.
- Commission
- A per-lot charge some account types apply in exchange for a much tighter spread. Compare the total of spread plus commission, never one alone.
- Confluence
- Several independent reasons pointing at the same level. A prior swing high, a pivot, a moving average and a Fibonacci retracement in the same place. More confluence, stronger level.
- Contract size
- The number of units of the base asset in one standard lot: 100,000 currency units for forex, and typically 100 troy ounces for gold. Not universal. Check your broker.
- Correlation
- The degree to which two instruments move together. Long EUR/USD and long GBP/USD at 1% each is closer to one 2% dollar position than to two independent trades.
D
- Drawdown
- The fall from an equity peak to the following trough, as a percentage. The most informative single statistic about a strategy. See the drawdown calculator.
E
- ECN
- Electronic Communication Network. An execution model routing orders to external liquidity providers rather than filling them internally, typically with raw spreads plus a commission.
- Equity
- Your balance plus or minus the floating profit and loss on open positions. Equity, not balance, is what margin level is calculated from.
- Exotic pair
- A currency pair involving a smaller or emerging-market currency, such as USD/TRY or USD/ZAR. Wide spreads and jumpy behaviour; usually not worth trading short-term.
- Expectancy
- The average result per trade: (win rate × average win) − (loss rate × average loss). Positive expectancy is the definition of an edge, and it is what a win rate on its own cannot tell you.
- Expert Advisor
- An automated trading program for MetaTrader, written in MQL, that can open and manage trades on its own. See what an Expert Advisor is.
F
- Fibonacci retracement
- Levels at 23.6%, 38.2%, 50%, 61.8% and 78.6% of a prior swing, used to locate where a pullback may end. See the Fibonacci calculator.
- Fill
- The actual execution of your order, at the actual price. It may differ from the price you requested. See slippage.
- Free margin
- Equity minus the margin currently used by open positions. What is available to open more positions or absorb adverse movement.
- Fundamental analysis
- Analysing currencies through economics (interest rates, inflation, growth, employment, politics) rather than through price patterns.
G
- Gap
- A jump between one period's close and the next period's open with no trading in between. Common at the Sunday forex open and after major news. Stops do not protect against gaps; they fill at the next available price.
H
- Hedging
- Holding offsetting positions to reduce exposure. Also a MetaTrader account mode allowing simultaneous long and short positions in the same instrument, in contrast to netting.
L
- Leverage
- Borrowed exposure expressed as a ratio, such as 1:100. It determines the margin a position requires and nothing else. See the leverage calculator.
- Limit order
- An instruction to buy below the current price or sell above it. Guarantees the price if it fills, but does not guarantee it fills at all.
- Liquidity
- How much can be traded without moving the price. Major pairs during the London–New York overlap are highly liquid; exotics at 3am are not.
- Long
- A position that profits when price rises. Buying the base currency of the pair.
- Lot
- The standard unit of position size. A standard lot is 100,000 currency units, a mini lot 10,000, a micro lot 1,000. Use the position size calculator to find the right one.
M
- Margin
- The deposit your broker sets aside while a position is open. It is collateral, not a fee, and it is returned when the position closes. See the margin calculator.
- Margin call
- A warning that your margin level has fallen to the broker's threshold, commonly 100%. New positions are blocked and the account is close to a stop-out.
- Margin level
- Equity divided by used margin, as a percentage. Falls as trades move against you. Below the stop-out level the broker closes positions for you.
- Market order
- An instruction to buy or sell immediately at the best available price. Guarantees execution, not price.
- Martingale
- Doubling position size after a loss so one win recovers everything. Produces a beautiful equity curve until it does not. Explained on the forex robot page.
- MetaTrader
- The dominant retail trading platform, in versions 4 and 5. Its automation format is the Expert Advisor. See MT4 and MT5.
- Momentum
- The rate of change of price. Momentum strategies assume a move in progress is more likely to continue than to reverse.
- Moving average
- The average price over the last N periods, plotted as a line. Used to define trend direction and as a dynamic level.
N
- Netting
- A MetaTrader 5 account mode in which one instrument holds one net position. Buying then selling reduces the position rather than opening a second one, in contrast to hedging mode.
- NFP
- Non-Farm Payrolls. The monthly US employment report, released on the first Friday of the month, and among the most reliably volatile events in forex and gold.
O
- Order block
- An area where a large amount of buying or selling previously occurred, used as a level where price may react again.
- Overbought / oversold
- A reading from an oscillator such as RSI suggesting a move has gone far quickly. It is not a reversal signal. Instruments can stay overbought for a long time in a strong trend.
P
- Pending order
- An order to enter at a price other than the current one: limit orders above or below, stop orders beyond. It sits with the broker until triggered or cancelled.
- Pip
- The standard smallest price increment: 0.0001 for most pairs, 0.01 for yen pairs. See the pip calculator.
- Pipette
- A tenth of a pip, the fifth decimal place on most quotes. Spreads are frequently quoted in pipettes.
- Pivot point
- A level calculated from the previous period's high, low and close, with support and resistance derived from it. See the pivot calculator.
- Position size
- How large a trade is, in lots. It should be an output of your risk percentage and stop distance, never an input.
Q
- Quote currency
- The second currency in a pair. In EUR/USD the quote is USD, and profit and loss is naturally denominated in it before conversion to your account currency.
R
- Range
- A market moving sideways between a floor and a ceiling. Range strategies fade the edges; trend strategies perform poorly here.
- Rebate
- See cashback.
- Requote
- A broker's response that the requested price is no longer available, offering a new one. Common in fast markets on some execution models.
- Resistance
- A price area where selling has previously overcome buying, capping advances.
- Reward-to-risk ratio
- The distance to the target divided by the distance to the stop. At 2:1 you need a win rate above 33.3% to break even. Without it, a win rate says nothing.
- Risk of ruin
- The probability of losing a defined share of the account given your edge and risk per trade. See the risk of ruin calculator.
- Rollover
- The daily point at which open positions are carried to the next value date and swap is applied. Spreads typically widen around it.
- RSI
- Relative Strength Index. An oscillator from 0 to 100 measuring the speed and magnitude of recent moves. Above 70 is conventionally overbought, below 30 oversold.
S
- Scalping
- Very short-term trading for a handful of pips. Costs are a large share of the result, so it is highly sensitive to spread and execution quality.
- Short
- A position that profits when price falls. Selling the base currency of the pair.
- Signal
- A trade idea specifying instrument, direction, entry, stop and target. See forex signals.
- Slippage
- The difference between the price you requested and the price you got. Usually adverse in fast markets, and the main reason backtests overstate performance.
- Spread
- The gap between bid and ask. It is the cost of entering, paid immediately, and it is why every trade starts marginally negative.
- Stop-loss
- An order that closes a position at a defined loss. It is the level that says the trade idea was wrong, and it is what makes a position sizeable.
- Stop-out
- The margin level at which a broker begins force-closing your positions, commonly 50%. Worse than your own stop, because you control neither which position closes nor at what price.
- Support
- A price area where buying has previously overcome selling, halting declines.
- Swap
- The overnight financing charge or credit applied to positions held past rollover, based on the interest differential between the two currencies plus the broker's markup. Usually charged triple on Wednesdays to cover the weekend.
- Swing trading
- Holding positions for days to weeks to capture a larger move. Fewer trades, wider stops, swap becomes a real cost.
T
- Take-profit
- An order that closes a position at a defined profit. MarketPro signals carry three, so you can scale out rather than make one all-or-nothing decision.
- Technical analysis
- Analysing price and volume history to identify patterns and levels, as opposed to fundamental analysis.
- Tick
- A single price update. An Expert Advisor's main logic runs on every incoming tick.
- Timeframe
- The period each candle represents. M15, H1, H4, D1. Shorter timeframes give more signals and more noise.
- Trailing stop
- A stop that follows price as the trade moves in your favour, locking in gains while leaving room for the move to continue.
- Trend
- A sustained directional move, conventionally defined by higher highs and higher lows, or lower highs and lower lows.
- Troy ounce
- The unit gold is priced in: 31.1035 grams, heavier than an ordinary ounce. One standard gold lot is typically 100 troy ounces.
V
- Volatility
- How much price moves over a period. Higher volatility requires wider stops and therefore smaller positions for the same risk.
- VPS
- Virtual Private Server. A machine that stays online continuously, used to run an Expert Advisor so it keeps managing positions when your own computer is off.
W
- Win rate
- The percentage of trades that were profitable. Meaningless without the reward-to-risk ratio: 80% winners at 1:4 against you loses money.
X
- XAG/USD
- Silver priced in US dollars. XAG is the ISO code for silver.
- XAU/USD
- Gold priced in US dollars per troy ounce. XAU is the ISO code for gold. See XAUUSD signals.
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Not investment advice. Past performance is not indicative of future results.