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Trading Glossary

50 key trading terms, organised alphabetically. Use the search to jump straight to a definition.

A1 term

Ask (Offer): The price at which the market (or your broker) is willing to sell a currency pair or instrument. When you buy, you pay the ask price.

B4 terms

Basis Point (bp): One hundredth of one percent (0.01%). Central bank rate changes are typically measured in basis points — a 25bp hike means a 0.25% increase.
Bear Market: A market in which prices are falling or expected to fall, typically defined as a decline of 20% or more from a recent high.
Bid: The price at which the market will buy a currency pair or instrument from you. When you sell, you receive the bid price.
Bull Market: A market in which prices are rising or expected to rise.

C2 terms

CFD (Contract for Difference): A financial instrument that allows traders to speculate on the price movement of an asset without owning the underlying asset. The profit or loss is the difference between the entry and exit prices, multiplied by the position size.
Currency Pair: The quotation of two currencies against each other. The first is the base currency; the second is the quote currency.

D2 terms

Day Trading: A trading style in which all positions are opened and closed within the same trading session, with no positions held overnight.
Drawdown: The peak-to-trough decline in an account's value over a specific period. Maximum drawdown is a key measure of a trading strategy's risk.

E3 terms

ECN (Electronic Communications Network): A trading model in which orders are matched electronically against other participants, often with tighter spreads and a commission charged per trade.
Equity: In trading account terms, equity is the current value of the account — the balance plus or minus any unrealised profit or loss on open positions.
Execution: The process of completing a trade order. Market execution fills the order at the best available price at the time; limit execution fills only at or better than a specified price.

F3 terms

Fibonacci Retracement: A technical analysis tool based on key ratios derived from the Fibonacci sequence. Common retracement levels (23.6%, 38.2%, 50%, 61.8%) are used to identify potential support and resistance areas.
Free Margin: The portion of account equity not currently being used as margin for open positions. Available to open new trades.
Fundamental Analysis: Analysis of economic, financial, and geopolitical factors to assess the intrinsic value of an asset and its likely future direction.

G2 terms

Going Long: Buying an instrument in expectation that its price will rise.
Going Short: Selling an instrument you do not own (in CFD trading) in expectation that its price will fall.

H1 term

Hedge: A position taken to offset the risk of an existing position. A hedge reduces potential losses from adverse price movements but also typically limits potential gains.

I2 terms

Indicator: A mathematical calculation based on price and/or volume data, used to provide additional information for trading analysis.
Initial Margin: The minimum deposit required to open a leveraged position. Expressed as a percentage of the total position value.

L5 terms

Leverage: A mechanism allowing traders to control a position larger than the capital deposited as margin. Leverage amplifies both gains and losses.
Limit Order: An instruction to buy or sell at a specific price or better. A buy limit order will only execute at or below the specified price; a sell limit order at or above.
Liquidity: The ease with which an instrument can be bought or sold without significantly affecting its price. Highly liquid markets (e.g. EUR/USD) have tight spreads and deep order books.
Long: Holding a position that profits when the price rises. See "Going Long."
Lot: The standard unit of trade size in forex. A standard lot = 100,000 units of the base currency. Mini lot = 10,000 units. Micro lot = 1,000 units.

M4 terms

Margin: The collateral required to maintain a leveraged position. Not a fee — it is held as security and returned when the position is closed.
Margin Call: A notification from a broker that account equity has fallen below the required maintenance margin level, requiring additional funds or position reduction.
Market Order: An instruction to buy or sell immediately at the best available current market price.
Moving Average (MA): A technical indicator that calculates the average price over a specified number of periods, smoothing out short-term noise to reveal the underlying trend.

N1 term

NFP (Non-Farm Payrolls): The monthly US employment report published by the Bureau of Labor Statistics. One of the most market-moving economic releases globally.

O1 term

Overnight Funding / Swap: A charge or credit applied to positions held overnight, reflecting the interest rate differential between the two currencies in a pair (or the cost of carrying a leveraged position in other instruments).

P4 terms

Pip: The smallest standard unit of price movement in a currency pair. For most pairs, one pip = 0.0001 (the fourth decimal place). For JPY pairs, one pip = 0.01.
Position: An active trade — either long (bought) or short (sold) — in a financial instrument.
Position Sizing: The process of determining how many units of an instrument to trade, based on account size, risk tolerance, and stop-loss distance.
Price Action: Trading analysis based purely on price movements without additional indicators. Focus on candlestick patterns, support/resistance, and trend structure.

Q1 term

Quote Currency: The second currency in a currency pair. In EUR/USD, the US dollar is the quote currency.

R3 terms

Resistance: A price level at which selling pressure has historically been sufficient to halt a price advance.
Risk-Reward Ratio: The ratio of the potential loss on a trade (distance to stop-loss) versus the potential gain (distance to take-profit target).
Rollover: The process of extending the settlement date of an open position. In forex, this is typically done automatically overnight and involves a swap charge or credit.

S7 terms

Short: Holding a position that profits when the price falls. See "Going Short."
Slippage: The difference between the expected price of a trade and the price at which it is actually executed. Slippage is most common during periods of high volatility or low liquidity.
Spread: The difference between the bid and ask price of an instrument. The spread is the primary cost of trading in spread-based pricing models.
Stop-Loss: An order that automatically closes a position if the price moves to a specified level against the trader, limiting the loss on the trade.
Stop-Out: The automatic closure of positions by a broker when account equity falls below the minimum required margin level.
Support: A price level at which buying interest has historically been sufficient to halt a price decline.
Swap: See "Overnight Funding / Swap."

T3 terms

Take-Profit: An order that automatically closes a position when the price reaches a specified profit level.
Technical Analysis: Analysis of historical price data — using charts, patterns, and indicators — to identify potential future price direction.
Tick: The smallest possible price movement in a market.

V2 terms

Volatility: The degree to which the price of an instrument fluctuates over a given period.
Volume: The total number of units of an instrument traded over a given period. High volume during a price move typically confirms the move; low volume may suggest it lacks conviction.

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Risk NoticeTrading Forex and CFDs involves significant risk and may not be suitable for all clients. Leverage can amplify losses. Please ensure you understand the risks before trading.