Forex & Trading Glossary
Comprehensive glossary of forex, CFD, and trading terms. Learn key concepts like leverage, margin, pips, spreads, and more with clear definitions and examples.
A
Ask Price
The ask price is the lowest price a seller is willing to accept for a financial instrument. Also known as the offer price, it is one half of a currency quote.
ATR (Average True Range)
ATR measures market volatility by calculating the average range of price candles over a specified period. Widely used for setting stop-loss levels.
B
Balance
Account balance is the total cash in your trading account, excluding any open positions. It reflects deposits, withdrawals, and realized profit/loss.
Bear Market
A bear market is a sustained period of declining prices, typically defined as a drop of 20% or more from recent highs. Characterized by pessimism and negative …
Bid Price
The bid price is the highest price a buyer is willing to pay for a financial instrument. It represents the demand side of a market quote.
Bollinger Bands
Bollinger Bands consist of a middle SMA and two outer bands that measure volatility. They expand during high volatility and contract during low volatility.
Broker
A broker is a financial intermediary that facilitates trades between traders and the market. In forex, brokers provide trading platforms, liquidity, and …
Bull Market
A bull market is a sustained period of rising prices, typically defined as an increase of 20% or more. Characterized by optimism, strong economy, and high …
Buy Limit / Sell Limit
Pending orders to buy below or sell above the current price. Buy limit executes at a lower price; sell limit executes at a higher price.
C
Candlestick Pattern
Candlestick patterns are visual formations on price charts that indicate potential price reversals or continuations. Originated in Japanese rice trading.
CFD (Contract for Difference)
A CFD is a derivative contract that lets traders speculate on price movements without owning the underlying asset. Popular for forex, stocks, commodities, and …
Chart Pattern
Chart patterns are recognizable formations on price charts that suggest future price direction. They include reversal and continuation patterns.
Commission
Commission is a fee charged by brokers for executing trades. It can be a flat rate per lot, a percentage of trade value, or built into the spread.
Currency Pair
A currency pair quotes two currencies against each other in forex trading. The first is the base currency, the second is the quote currency.
D
Day Trading
Day trading is buying and selling financial instruments within the same trading day. All positions are closed before market close to avoid overnight risk.
Demo Account
A demo account is a practice trading account with virtual money. It replicates real market conditions, allowing traders to test strategies risk-free.
Drawdown
Drawdown measures the decline from peak to trough in a trading account. It indicates the maximum loss a trader has experienced and is a key risk metric.
E
ECN Broker
An ECN broker routes trades directly to a network of liquidity providers, offering tight spreads, transparent pricing, and no dealing desk intervention.
Economic Calendar
An economic calendar lists scheduled economic events and data releases that can impact financial markets. Essential for fundamental analysis and news trading.
Equity
Equity is the current value of your trading account including unrealized profits and losses from open positions. It represents your real-time account worth.
F
Fibonacci Retracement
Fibonacci retracement uses horizontal lines to indicate areas of support or resistance at key Fibonacci levels before price continues in the original direction.
Forex (Foreign Exchange)
Forex is the global decentralized market for trading currencies. It is the largest financial market in the world with a daily volume exceeding $7.5 trillion.
Fundamental Analysis
Fundamental analysis evaluates currencies and assets by examining economic indicators, central bank policies, and macroeconomic factors to determine intrinsic …
G
Gap
A gap is a price level where no trading occurred, creating a visible jump on a chart. Common at market open or after major news events.
Good Till Cancelled (GTC)
GTC is an order duration that keeps a pending order active until it is filled or manually cancelled by the trader.
H
Hedging
Hedging is a risk management strategy that opens an opposing position to offset potential losses from an existing trade.
High Frequency Trading (HFT)
HFT uses powerful computers to execute thousands of trades per second, exploiting tiny price differences. Primarily used by institutional traders.
I
Inflation
Inflation is the rate at which the general price level of goods and services rises, eroding purchasing power. A key driver of currency value and interest rate …
Interest Rate
Interest rates set by central banks are the most powerful driver of currency values. Rate changes affect capital flows, inflation, and economic growth.
L
Leverage
Leverage allows traders to control large positions with small capital. Expressed as a ratio (e.g., 1:100), it amplifies both profits and losses.
Limit Order
A limit order is a pending order to buy or sell at a specified price or better. It ensures price precision but does not guarantee execution.
Liquidity
Liquidity describes how easily an asset can be bought or sold without affecting its price. High liquidity means tight spreads and fast execution.
Long Position
A long position means buying an asset with the expectation that its price will rise. Profits increase as the price goes up.
Lot
A lot is the standard unit of measurement in forex trading. One standard lot equals 100,000 units of the base currency.
M
MACD (Moving Average Convergence Divergence)
MACD is a trend-following momentum indicator that shows the relationship between two moving averages. It consists of the MACD line, signal line, and histogram.
Margin
Margin is the collateral required to open and maintain a leveraged trading position. It acts as a good faith deposit with your broker.
Margin Call
A margin call occurs when your account equity falls below the broker's margin requirement, prompting a warning or automatic closure of positions.
Market Order
A market order is an instruction to buy or sell immediately at the best available current price. It guarantees execution but not price.
Moving Average
A moving average smooths price data to identify trends. The most common types are Simple Moving Average (SMA) and Exponential Moving Average (EMA).
O
Open Position
An open position is an active trade that has been executed but not yet closed. It carries unrealized profit or loss until it is settled.
Order Book
An order book displays all pending buy and sell orders for an asset at various price levels, showing market depth and supply/demand.
P
Pip
A pip is the smallest standard unit of price change in forex trading. For most pairs, it equals 0.0001 (one ten-thousandth). Essential for measuring profit and …
Price Action
Price action trading focuses on raw price movement without indicators. Traders analyze candlestick patterns, support/resistance, and chart formations.
Profit and Loss (P&L)
P&L measures the financial gain or loss from trading activity. Can be realized (closed trades) or unrealized (open positions).
R
Resistance
Resistance is a price level where selling pressure is strong enough to prevent the price from rising further. It acts as a ceiling on price movement.
Risk Management
Risk management is the process of identifying, analyzing, and controlling trading risks. It includes position sizing, stop losses, and portfolio …
Rollover / Swap
Rollover or swap is the interest earned or paid for holding a forex position overnight. It is based on the interest rate differential between the two …
RSI (Relative Strength Index)
RSI is a momentum oscillator that measures the speed and change of price movements on a scale of 0 to 100. Used to identify overbought and oversold conditions.
S
Short Position
A short position means selling an asset first, then buying it back later. Traders profit when the price falls. Also called shorting or going short.
Slippage
Slippage is the difference between the expected price of a trade and the price at which it actually executes. Common during high volatility or low liquidity.
Spread
The spread is the difference between the bid and ask price. It represents the cost of trading and is how most brokers make money.
Stop Loss
A stop loss is a predefined order that automatically closes a trade at a specified price to limit losses. It is the most essential risk management tool.
Support
Support is a price level where buying pressure is strong enough to prevent the price from falling further. It acts as a floor on price movement.
Swap
Swap is the interest differential between two currencies in a pair, charged or credited when a position is held overnight.
T
Take Profit
Take profit is a pending order that automatically closes a trade when the price reaches a specified profit target.
Technical Analysis
Technical analysis studies price charts and statistical indicators to forecast future price movements. Based on the idea that price reflects all known …
Trailing Stop
A trailing stop automatically adjusts the stop loss level as the price moves in your favor, locking in profits while allowing the trade to continue running.
V
Volatility
Volatility measures the rate and magnitude of price changes in a financial instrument. High volatility means large price swings; low volatility means stable …
Volume
Volume represents the total number of shares, contracts, or lots traded during a specific period. It confirms trend strength and potential reversals.