Most trading mistakes are not strategy failures. They are vocabulary failures, made by someone who clicked a button whose name they had not fully understood. This trading terminology glossary defines the 126 terms you will actually meet on a platform, in plain English, with no assumed background. Look one up in seconds, or read the eight that matter most and stop there.
In short: five terms carry most of the risk in leveraged trading. Spread is what a trade costs to open. Leverage sets how much market you control compared with your deposit. Margin is the money held against the position. A stop loss caps the damage when you are wrong. A margin call is the warning that your equity can no longer support what you hold. Understand those five and the rest of this page is detail.
Terms are listed A to Z. Type in the box to filter the whole list, or jump to a letter. Where a term has a full explainer of its own, the entry links straight to it.
Showing all 126 terms
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A
- Appreciation
- A rise in the value of a currency or asset against another. If EUR/USD moves from 1.08 to 1.10, the euro has appreciated against the dollar.
- Arbitrage
- Buying an asset in one market and selling it in another at the same time to capture a price difference. The gaps are usually tiny and close fast. Read the full explainer on Arbitrage
- Ask also called Offer
- The price you pay to buy. It is always the higher side of the quote, and the difference between it and the bid is the spread.
- Average True Range also called ATR
- An indicator that measures how far a market typically moves in a given period. Traders use it to size stops against real volatility rather than a guess.
- Averaging Down
- Adding to a losing position to lower the average entry price. It reduces the break-even point but increases the size of the loss if the market keeps going the wrong way.
B
- Base Currency
- The first currency in a pair. In EUR/USD the euro is the base, and the price tells you how many dollars one euro costs.
- Basis Point also called bp, bps
- One hundredth of a percentage point. Central banks and analysts use it to avoid confusion, so a 25 basis point cut means 0.25 percent.
- Bid
- The price you receive when you sell. It is always the lower side of the quote.
- Bid-Ask Spread also called Spread
- The gap between the buy price and the sell price. It is the cost of entering a trade, which is why a position starts slightly negative. Read the full explainer on Bid-Ask Spread
- Blue-Chip Stocks
- Shares in large, long-established companies with a record of steady results. They tend to move less violently than smaller listings. Read the full explainer on Blue-Chip Stocks
- Bollinger Bands
- Three lines plotted around price: a moving average with a band above and below set by volatility. The bands widen when a market gets busy and narrow when it goes quiet.
- Breakout
- A move that pushes price out of a range it has been stuck in. Breakouts are watched because they often mark the start of a new trend, though plenty fail.
- Broker
- The firm that gives you access to a market and executes your orders. Brokers differ in pricing, execution model and which regulator oversees them.
- Bull and Bear Markets
- A bull market is a sustained rise in prices, a bear market a sustained fall. The usual rough marker for a bear market is a drop of about a fifth from the peak. Read the full explainer on Bull and Bear Markets
- Buy-Stop Limit
- An order that activates once price rises to a trigger level, then buys only at or below a second price you set. It combines breakout entry with a cap on what you will pay. Read the full explainer on Buy-Stop Limit
C
- Candlestick
- A price bar that shows the open, high, low and close for one period. The body is the open-to-close range and the thin lines above and below are the extremes.
- Carry Trade
- Holding a currency that pays a higher interest rate while being short one that pays less, aiming to collect the difference. A sharp move in the exchange rate can wipe out the gain.
- CFD also called Contract for Difference
- A contract for difference: an agreement to exchange the change in an asset’s price without owning the asset. You can go long or short, and losses can exceed the initial outlay unless protection applies. Read the full explainer on CFD
- Commission
- A separate fee charged per trade, common on accounts that quote raw spreads. Total cost is commission plus spread, not one or the other.
- Commodity Trading
- Trading raw materials such as oil, gold, gas or grain. Most retail exposure is through derivatives rather than physical delivery. Read the full explainer on Commodity Trading
- Consolidation also called Range
- A stretch where price moves sideways in a narrow band while buyers and sellers are evenly matched. It often precedes a breakout.
- Contract Size
- The quantity of the underlying asset covered by one contract or lot. It decides how much money one point of movement is worth.
- Counter Currency also called Quote Currency
- The second currency in a pair, the one the price is expressed in. In EUR/USD the dollar is the counter currency.
- Cross Pair also called Cross
- A currency pair that does not include the US dollar, such as EUR/GBP. Crosses often carry wider spreads than dollar pairs.
- Crypto Trading
- Trading digital assets such as bitcoin, either on an exchange or through derivatives. Prices run around the clock and move faster than most traditional markets. Read the full explainer on Crypto Trading
- Currency Pair
- Two currencies quoted against each other. Buying the pair means buying the first currency and selling the second at the same time. Read the full explainer on Currency Pair
- Cyclical Stock
- A share whose results track the wider economy, such as airlines, carmakers or hotels. They tend to do well in an expansion and badly in a downturn. Read the full explainer on Cyclical Stock
D
- Day Trading
- Opening and closing positions within the same session so nothing is held overnight. It avoids overnight financing but demands constant attention.
- Depreciation
- A fall in the value of a currency or asset against another. The mirror image of appreciation.
- Derivative
- A contract whose value comes from something else – a share, an index, a currency, a commodity. CFDs, futures and options are all derivatives.
- Divergence
- When price makes a new high or low but an indicator does not follow. Traders read it as a sign the current move is losing strength.
- Dividend Yield
- The annual dividend divided by the share price, shown as a percentage. It says what income the share pays relative to what it costs. Read the full explainer on Dividend Yield
- Dow also called DJIA
- The Dow Jones Industrial Average, an index of 30 large US companies. It is price-weighted, so a high-priced share sways it more than a large one. Read the full explainer on Dow
- Drawdown
- The fall from a peak in account value to the low that follows, usually given as a percentage. It measures how bad things got, not just where you ended up.
E
- ECN
- An electronic communication network that matches orders from many participants directly rather than through a single dealer. Pricing usually comes as a raw spread plus commission.
- Economic Calendar
- A schedule of upcoming data releases and central bank decisions. Traders use it to know when volatility is likely rather than to be surprised by it.
- Equity
- In an account, the balance adjusted for open profit and loss – what the account is worth right now. In company terms it is ownership in a business. Read the full explainer on Equity
- Execution
- The act of filling your order in the market. Speed and the price you actually get matter as much as the price you saw when you clicked.
- Exposure
- The total value of the market you control through your positions, which leverage can make far larger than your deposit.
F
- Fill
- The completion of an order. A partial fill means only some of the requested size was executed.
- Fixed Spread
- A spread the broker keeps constant regardless of conditions. It gives predictable costs but is usually wider than a variable spread in calm markets.
- Floating Spread also called Variable Spread
- A spread that moves with supply and demand. It narrows when a market is liquid and widens around news and at session changeovers.
- Fundamental Analysis
- Judging value from underlying conditions – earnings, interest rates, growth, supply and demand – rather than from the shape of the chart.
- Futures
- A standardised contract to buy or sell an asset at a set price on a set date, traded on an exchange. Widely used for commodities and indices.
G
- Gap
- A jump between one period’s close and the next period’s open with no trading in between. Gaps show up after weekends and major announcements.
- Going Long also called Long
- Buying, in the expectation that price will rise. The position gains as the market moves up.
- Going Short also called Short
- Selling first in the expectation that price will fall, then buying back lower. The position gains as the market moves down.
- Good Till Cancelled also called GTC
- An order that stays live until it fills or you remove it, rather than expiring at the end of the day.
H
- Hedging
- Opening a position to offset the risk in one you already hold. It reduces exposure to a bad move and usually caps the upside too. Read the full explainer on Hedging
I
- Indices also called Index
- Baskets that track a group of shares, such as the FTSE 100 or S&P 500. Trading an index is a bet on the group rather than one company. Read the full explainer on Indices
- Inflation
- The rate at which prices rise across an economy. It drives central bank decisions, which is why inflation data moves currencies so sharply.
- Initial Margin
- The deposit required to open a leveraged position, set as a percentage of its full value.
- Interest Rate Differential
- The gap between the interest rates of two currencies. It determines whether holding a pair overnight pays you or costs you.
J
- Japanese Candlestick
- The candlestick chart format, developed by Japanese rice traders and now the default view in most trading platforms.
K
- Kiwi
- Trading floor nickname for the New Zealand dollar, and for NZD/USD. Named after the bird on the coin.
L
- Leverage
- Controlling a position larger than your deposit by borrowing the rest from the broker. It multiplies gains and losses equally, and retail leverage is capped in many jurisdictions. Read the full explainer on Leverage
- Limit Order
- An instruction to trade only at a specified price or better. You control the price but the order may never fill. Read the full explainer on Limit Order
- Liquidation
- The forced closing of positions when an account can no longer support them. Usually the last step after a margin call goes unanswered.
- Liquidity
- How easily an asset can be traded without moving its price. Deep liquidity means tight spreads and reliable fills. Read the full explainer on Liquidity
- Lot Size also called Lot
- The unit that trade size is measured in. In forex a standard lot is 100,000 units of the base currency, with mini and micro lots at a tenth and a hundredth of that. Read the full explainer on Lot Size
M
- MACD
- Moving Average Convergence Divergence, an indicator built from the gap between two moving averages. It is read for momentum shifts and crossovers.
- Major Pairs also called Majors
- The most heavily traded currency pairs, all involving the US dollar – EUR/USD, USD/JPY, GBP/USD and a handful of others. They carry the tightest spreads.
- Margin
- The money set aside from your balance to keep a leveraged position open. It is a deposit held against the position, not a fee. Read the full explainer on Margin
- Margin Call
- A warning that account equity has fallen too close to the margin required. Add funds or reduce exposure, or positions may be closed for you.
- Margin Level
- Equity divided by used margin, as a percentage. Brokers set the thresholds at which warnings and automatic closures begin.
- Market Capitalization also called Market Cap
- Share price multiplied by the number of shares in issue – what the market says a whole company is worth. Read the full explainer on Market Capitalization
- Market Order
- An instruction to trade immediately at the best price available. Speed is guaranteed, the exact price is not.
- Minor Pairs also called Crosses
- Actively traded pairs that leave out the US dollar, such as EUR/GBP or AUD/JPY. Spreads are usually wider than the majors.
- Momentum
- The speed and strength behind a price move. Momentum tools try to show whether a trend is building or fading.
- Moving Average also called MA
- The average price over a set number of periods, redrawn as new prices arrive. It smooths noise so the direction is easier to read.
N
- Negative Balance Protection
- A safeguard that stops a retail account falling below zero, so you cannot end up owing more than you deposited. Availability depends on the regulator and the account type.
- Non-Farm Payrolls also called NFP
- The monthly US employment report, excluding farm work. One of the most reliable sources of sharp volatility in currency markets.
O
- Open Position
- A trade that is still live and still exposed to price movement. Its profit or loss is unrealised until it is closed.
- Order
- Any instruction sent to the market – to open, to close, or to do either automatically when a condition is met.
- Oscillator
- An indicator that moves inside a fixed range and is read for overbought and oversold conditions. RSI and stochastics are common examples.
- Over-the-Counter also called OTC
- Trading arranged directly between two parties rather than on a central exchange. Forex and CFDs are traded this way. Read the full explainer on Over-the-Counter
- Overnight Financing also called Swap, Rollover
- The charge or credit applied for holding a leveraged position past the daily cutoff, based on the interest difference between the two sides.
P
- Pending Order
- An order placed now to execute later, once price reaches a level you set. Limit and stop orders are both pending orders.
- Pip
- The standard small unit of movement in a currency pair, normally the fourth decimal place. For pairs quoted against the yen it is the second. Read the full explainer on Pip
- Position Sizing
- Deciding how much to trade so that a loss stays within what you are willing to lose. It matters more to long-run results than entry timing.
- Price Action
- Reading the market from price movement itself – candles, levels, structure – rather than from indicators layered on top.
- Profit and Loss also called P&L
- The running result of your trading. Unrealised P&L belongs to open positions; realised P&L is locked in once they close.
Q
- Quote
- The current two-sided price for an instrument, showing the bid and the ask together.
- Quote Currency
- The second currency in a pair, in which the price is expressed. Profit and loss arise in this currency before conversion.
R
- Realized Profit
- Profit or loss that is fixed because the position has been closed. Until then it can still change.
- Relative Strength Index also called RSI
- An oscillator scaled from 0 to 100 that compares recent gains with recent losses. Readings near the extremes suggest a move may be stretched. Read the full explainer on Relative Strength Index
- Resistance
- A level where selling has repeatedly stopped price rising. The more often it holds, the more traders watch it.
- Retracement also called Pullback
- A temporary move against the prevailing trend before it resumes. Distinguishing a retracement from a reversal is the hard part.
- Risk-Reward Ratio
- What you stand to lose set against what you stand to gain on a trade. A ratio of 1:2 risks one unit to make two.
- Rollover
- The process of carrying an open position into the next trading day, which triggers the overnight financing charge or credit.
S
- Scalping
- A style built on many short trades chasing small moves. Costs matter enormously because the spread is paid on every one. Read the full explainer on Scalping
- Sentiment
- The overall mood of the market – how bullish or bearish participants are as a group, regardless of the fundamentals.
- Short Selling
- Selling an asset you do not own in order to buy it back cheaper. Losses are theoretically unlimited because price can keep rising. Read the full explainer on Short Selling
- Slippage
- The difference between the price you expected and the price you got. It grows in fast markets and around news.
- Spot Price
- The price for immediate settlement, as opposed to a price agreed for a future date.
- Spread
- The difference between the bid and the ask. It is the built-in cost of every trade and widens when liquidity thins. Read the full explainer on Spread
- Stock also called Share, Equity
- A unit of ownership in a company. Holding one gives a claim on a slice of its assets and profits. Read the full explainer on Stock
- Stock Trading
- Buying and selling company shares to profit from price movement, either by owning them outright or through derivatives. Read the full explainer on Stock Trading
- Stop Loss Order
- An instruction to close a position once it loses a set amount, capping the damage without you having to watch. In a gap it can fill worse than the level set. Read the full explainer on Stop Loss Order
- Stop Out
- The automatic closing of positions once margin level falls below the broker’s floor. It is the backstop after a margin call. Read the full explainer on Stop Out
- Stop-Sell Limit
- An order that triggers when price falls to a level, then sells only at or above a second price. It seeks breakdown entry without accepting any price. Read the full explainer on Stop-Sell Limit
- Support
- A level where buying has repeatedly stopped price falling. Once broken, it often starts acting as resistance instead.
- Swap
- The interest adjustment applied for holding a leveraged position overnight. It can be a charge or a credit depending on the pair and direction.
- Swing Trading
- Holding positions for days or weeks to capture a larger move. It needs fewer decisions than day trading but carries overnight risk.
T
- Take Profit also called TP
- An order that closes a position automatically once it reaches a set gain. It removes the temptation to hold on too long.
- Technical Analysis
- Studying price and volume history to judge what may happen next, on the view that patterns of behaviour repeat. Read the full explainer on Technical Analysis
- Technical Indicator
- A calculation drawn from price or volume and plotted on a chart to make a condition easier to see – trend, momentum or volatility. Read the full explainer on Technical Indicator
- Tick
- The smallest price change an instrument can make, and also a single update in the price feed.
- Ticker Symbol
- The short code that identifies a traded instrument, such as AAPL for Apple. Codes can differ between exchanges. Read the full explainer on Ticker Symbol
- Total Return
- The full result of holding an investment, counting income such as dividends alongside the change in price. Read the full explainer on Total Return
- Trading Session
- The active hours of a regional market. The Sydney, Tokyo, London and New York sessions overlap, and liquidity peaks where they do.
- Trailing Stop
- A stop loss that follows price as a trade moves your way and stays put when it does not, protecting gains without capping them.
- Trend
- A sustained direction in price. An uptrend puts in higher highs and higher lows, a downtrend the reverse.
U
- Unrealized Profit also called Floating P&L
- Profit or loss on positions that are still open. It moves with every tick and is not yours until you close.
- US Dollar Index also called DXY
- A measure of the dollar against a basket of major currencies. Traders watch it as a read on dollar strength overall.
V
- VIX
- An index tracking expected volatility in US equities, built from options prices. It tends to spike when markets fall.
- Volatility
- How much and how quickly a price moves. High volatility widens the range of outcomes in both directions, not just the good one.
- Volume
- How much of an instrument changed hands in a period. Rising volume behind a move suggests genuine participation. Read the full explainer on Volume
W
- Whipsaw
- A sharp move that reverses just as quickly, stopping traders out on both sides before settling.
- Wick also called Shadow
- The thin line above or below a candle body, marking the extreme price reached before the close pulled back.
- Working Order
- An order sitting in the market waiting for its conditions to be met. It can be changed or cancelled until it fills.
X
- XAU/USD
- The code for gold priced in US dollars, where XAU is one troy ounce. The most widely traded way to take a position on gold.
Y
- Yield
- The income an asset pays as a percentage of its price – dividends on a share, interest on a bond.
- Yield Curve
- Bond yields plotted against how long they run. Its shape is read as a signal about growth and interest rate expectations.
Z
- Zero-Sum
- A market where one side’s gain is the other side’s loss. Currency and derivatives trading is close to zero-sum before costs, and negative-sum after them.
Common questions about trading terminology
What do I actually need to know before my first trade?
Five terms carry most of the risk: spread, leverage, margin, stop loss and margin call. Spread is what the trade costs to open, leverage decides how large your exposure is compared with your deposit, margin is the money held against the position, a stop loss caps the loss, and a margin call is the warning that arrives when your equity can no longer support what you hold.
What is the difference between a pip and a point?
A pip is the standard small unit of movement in a currency pair, normally the fourth decimal place, or the second for pairs quoted against the yen. A point usually means the smallest change the platform can display, which on a five-decimal quote is a tenth of a pip.
Is the spread the only cost of a trade?
No. The spread is the cost of opening, but some accounts charge a separate commission per trade, and any position held past the daily cutoff attracts an overnight financing charge or credit. Total cost is all three together.
What is the difference between a market order and a limit order?
A market order fills immediately at the best price available, so you are certain of execution but not of price. A limit order fills only at your price or better, so you control the price but the order may never execute.
Does a stop loss guarantee my maximum loss?
It caps the loss under normal conditions, but not in every case. If the market gaps past your level, over a weekend or on major news, the order fills at the next available price, which can be worse than the one you set.
Why does a trade start slightly negative?
Because you buy at the ask and sell at the bid. The gap between them is the spread, so a new position is behind by roughly that amount before the market has moved at all.
What is the difference between balance and equity?
Balance is the settled cash in the account. Equity is that balance adjusted for the profit or loss on positions still open, which is why equity moves with every tick while balance does not.
Where to go next
Every term above that carries a link has a full explainer behind it. For the wider picture, start with the definitions library, then the trading guides for step-by-step walkthroughs.
- Definitions library – in-depth pages on 37 of the terms on this page
- Trading guides – how to apply them
- Leverage explained – the term that most often surprises new traders
- Margin explained – how much of your balance a position actually ties up
Reference sources: currency codes such as EUR and USD follow ISO 4217. Market structure statistics for foreign exchange are published by the Bank for International Settlements, and EU retail rules on leveraged products are set out by ESMA.