Sixty-one terms you will meet in your first year, written the way a person would explain them rather than the way a broker’s help page does. Type in the box to filter, or jump to a letter.
- Ask
- The price at which you can buy. Always the higher of the two quoted prices.
- Base currency
- The first currency in a pair. In EUR/USD the base is the euro, and the quote tells you how many dollars one euro costs.
- Bid
- The price at which you can sell. Always the lower of the two quoted prices.
- Broker
- The firm that gives you access to the market. How it makes money — spread, commission, or taking the other side — decides a lot about your costs.
- Carry
- The interest you pay or receive for holding a position overnight, driven by the rate difference between the two currencies.
- CFD
- Contract for difference. A contract that pays the difference between opening and closing price, without you owning the underlying.
- Commission
- A fee charged per lot, usually on both opening and closing. Common on accounts advertising raw spreads.
- Contract size
- The number of units in one lot. 100,000 for a standard forex lot, 10,000 for a mini, 1,000 for a micro.
- Correlation
- The tendency of two instruments to move together. Three correlated positions are one bet with three tickets.
- Cross
- A pair that does not include the US dollar, such as EUR/GBP or GBP/JPY. Usually wider spreads than majors.
- Drawdown
- The fall from an equity high to the following low, in percent. Recovering 30% takes a 43% gain.
- ECN
- A model where the broker routes your order to a pool of liquidity providers rather than filling it internally.
- Equity
- Your balance plus or minus the profit and loss on open positions. This is the number margin is measured against.
- Execution
- How and at what price your order is actually filled. Slippage and rejections belong here, not to strategy.
- Expiry
- For options and futures, the date the contract ends. FX options conventionally cut at 10:00 New York.
- Fill
- The completed execution of an order, at a specific price and time.
- Fundamental analysis
- Forming a view from interest rates, growth, inflation and policy rather than from price patterns.
- Gap
- A jump between the close of one period and the open of the next, with no trading in between. Weekend gaps are the common case.
- Hedge
- Holding an offsetting position to reduce exposure. It reduces risk and cost-free hedging does not exist.
- Illiquidity
- Not enough resting orders to absorb a trade at the quoted price. Shows up as wide spreads and bad fills.
- Interbank
- The wholesale market between banks where the underlying prices you see are made.
- Leverage
- Borrowed exposure expressed as a ratio. 1:100 means 1,000 of margin controls 100,000 of position.
- Limit order
- An instruction to trade at a specified price or better. It may not fill at all.
- Liquidity
- How much can be traded without moving the price. Highest during the London–New York overlap.
- Long
- A position that profits if the base currency rises against the quote currency.
- Lot
- The standard unit of position size. One standard lot is 100,000 units of the base currency.
- Major
- A pair including the US dollar and another highly traded currency: EUR/USD, USD/JPY, GBP/USD, USD/CHF and the commodity dollars.
- Margin
- The deposit held by the broker while a position is open. It is locked, not spent.
- Margin call
- A demand for more funds when equity falls too close to the required margin.
- Market maker
- A broker that quotes both sides itself and may take the other side of your trade.
- Market order
- An instruction to trade immediately at the best available price. It fills, but not necessarily where you expected.
- Momentum
- The tendency of a move to persist. Measured by indicators such as RSI or MACD, none of which predict.
- Moving average
- The mean price over a set number of periods, used to smooth noise. It lags by construction.
- Negative balance protection
- A rule, mandatory in some jurisdictions, under which the broker writes off a balance below zero.
- Order book
- The set of resting buy and sell orders at each price. Retail platforms rarely show the real one.
- Overnight financing
- See swap. Charged or paid when a position is held past the daily rollover.
- Pip
- The standard smallest quoted increment. 0.0001 for most pairs, 0.01 for yen pairs.
- Pipette
- A tenth of a pip, shown as the fifth decimal on most pairs.
- Position sizing
- Deciding how large a trade should be given the stop distance and the risk budget. The only part of trading with unambiguous arithmetic.
- Quote currency
- The second currency in a pair, in which the price is expressed.
- R
- A trade’s result divided by the risk taken on it. Keeps results comparable as the account changes size.
- Range
- A period where price oscillates between levels instead of trending. Most of the trading day, most of the time.
- Requote
- A broker offering a different price after you clicked. Common in fast markets on dealing-desk accounts.
- Risk-reward
- The ratio of what you stand to gain to what you are risking. Meaningless without a win rate attached.
- Rollover
- The daily point at which open positions are carried to the next value date, triggering swap.
- Scalping
- Trading very short holding periods for small moves. The style most sensitive to spread and commission.
- Short
- A position that profits if the base currency falls against the quote currency.
- Slippage
- The difference between the price you expected and the price you got. Worst on stops in fast markets.
- Spread
- The difference between bid and ask, and the cost you pay on every round trip before commission.
- Stop-loss
- A resting order to close a position once price reaches a level. It caps intent, not always outcome.
- Stop-out
- The broker automatically closing positions when margin level falls below a set threshold.
- Swap
- The interest adjustment applied to positions held overnight, positive or negative.
- Take-profit
- A resting order to close a position at a favourable price.
- Technical analysis
- Forming a view from price and volume history rather than from economic data.
- Tick
- A single change in price, whatever its size.
- Trailing stop
- A stop that follows price at a fixed distance while the trade moves in your favour.
- Trend
- A sustained directional move. Easy to identify afterwards, harder in the middle.
- Volatility
- How much price moves over a period, regardless of direction. Usually measured with ATR or standard deviation.
- Volume
- How much was traded. In spot forex there is no central exchange, so platform volume is only your provider’s slice.
- Whipsaw
- A false break that reverses immediately, taking out stops on both sides.
- Yield differential
- The gap between the interest rates of two currencies. The main driver of carry and of pairs like USD/JPY.
How to use this
If a term here is the whole answer to your question, take it and move on. If it is not, most entries point at something with real consequences — spread, margin, leverage and stop-loss orders each have a full article behind them, and the calculator turns several of these definitions into numbers for your own account.
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