Glossary

Trading & ForexGlossary

Clear, concise definitions of the terms you'll encounter as a trader.

A

Arbitrage

Profiting from price differences of the same asset across different markets or brokers.

Ask Price

The price at which the market (or broker) is willing to sell a currency pair to you.

B

Base Currency

The first currency in a pair; its value is quoted against the second (quote) currency.

Bid Price

The price at which the market (or broker) is willing to buy a currency pair from you.

Broker

A firm or intermediary that provides access to financial markets and executes client orders.

Bull & Bear Market

A bull market is a sustained rise in prices; a bear market is a sustained decline.

C

Candlestick

A chart element showing the open, close, high and low prices for a period.

Central Bank

The institution that manages a country's currency, money supply and interest rates.

CFD

A Contract for Difference: a derivative that tracks an asset's price without owning the underlying asset.

Commission

A fee charged by a broker for executing a trade, separate from the spread.

Correlation

A measure of how two instruments move in relation to each other, from -1 to +1.

Currency Pair

Two currencies quoted against each other, such as EUR/USD.

D

Day Trading

Opening and closing positions within the same trading day, avoiding overnight exposure.

Derivative

A financial instrument whose value is derived from an underlying asset, such as a CFD.

Drawdown

The peak-to-trough decline of an account's value over a period, used to measure downside risk.

E

Equity

The current total value of a trading account, including the profit or loss of open positions.

Exotic Pair

A currency pair combining a major currency with one from a smaller or emerging economy.

Exposure

The total amount of capital at risk in the market at a given time.

F

Fibonacci Retracement

A technical tool using Fibonacci ratios to identify potential support and resistance levels.

Forex

The global market for trading currencies, where one currency is exchanged for another.

Fundamental Analysis

Evaluating economic data, news and events to assess an asset's value.

G

Gap

A sharp jump in price between two periods, often after news or a weekend, with no trading in between.

H

Hedging

Opening a position to offset potential losses in another position, reducing overall exposure.

I

Interest Rate

The rate set by a central bank that strongly influences a currency's value.

J

JPY (Japanese Yen)

The currency of Japan and one of the most traded currencies in the forex market.

K

Kiwi

A market nickname for the New Zealand dollar and the NZD/USD currency pair.

L

Leverage

A facility that lets you control a larger position with a smaller amount of capital. It magnifies both gains and losses.

Limit Order

An order to buy or sell at a specified price or better, executed only when the market reaches that level.

Liquidity

How easily an instrument can be bought or sold without significantly affecting its price.

Long Position

A buy position opened in the expectation that the instrument's price will rise.

Lot

A standardized unit of trade size. A standard forex lot equals 100,000 units of the base currency.

M

Major Pairs

The most traded currency pairs, all including the US dollar (e.g. EUR/USD, GBP/USD).

Margin

The capital required to open and maintain a leveraged position.

Margin Call

A notification that account equity has fallen close to the required margin, requiring additional funds or position closure.

Market Order

An order to buy or sell immediately at the best currently available price.

Minor Pairs

Currency pairs that do not include the US dollar, such as EUR/GBP or GBP/JPY.

Momentum

The speed or strength of a price movement, used to gauge the power behind a trend.

Moving Average

An indicator that smooths price data over a period to help identify the trend direction.

N

Netting

Combining multiple positions in the same instrument into a single net position.

Non-Farm Payrolls (NFP)

A key US employment report that often causes strong volatility in the forex market.

O

OCO Order

A One-Cancels-the-Other order: when one of two linked orders executes, the other is cancelled.

Overnight Position

A position kept open past the daily market close, which may incur a swap charge.

P

Pending Order

An instruction to open a trade automatically when the price reaches a specified level.

Pip

The smallest standard price move in a currency pair, typically the fourth decimal place.

Pivot Point

A calculated level used by traders to identify potential support and resistance intraday.

Price Action

Analysing raw price movement on a chart, without relying heavily on indicators.

Q

Quote Currency

The second currency in a pair, showing how much is needed to buy one unit of the base currency.

R

Relative Strength Index (RSI)

A momentum indicator (0–100) that flags potentially overbought or oversold conditions.

Resistance

A price level where selling pressure tends to stop or reverse an upward move.

Rollover

The process of extending a position to the next day, which may incur a swap charge.

S

Scalping

A short-term strategy of making many small trades to capture tiny price moves.

Short Position

A sell position opened in the expectation that the instrument's price will fall.

Slippage

The difference between the expected price of an order and the price at which it is actually executed.

Spot Price

The current market price at which an asset can be bought or sold for immediate delivery.

Spread

The difference between the bid (sell) and ask (buy) price of an instrument.

Stop Loss

An order that closes a position at a predefined level to limit potential losses.

Support

A price level where buying pressure tends to stop or reverse a downward move.

Swap

The interest charged or earned for holding a leveraged position overnight.

T

Take Profit

An order that closes a position once a target profit level is reached.

Technical Analysis

The study of price charts and indicators to identify potential trading opportunities.

Trailing Stop

A stop-loss that automatically follows the price at a set distance to lock in gains.

Trend

The general direction in which a market price is moving — up, down or sideways.

U

Underlying Asset

The instrument (such as a currency, index or commodity) on which a derivative like a CFD is based.

Uptrend

A market condition where prices form successively higher highs and higher lows.

V

Volatility

The degree of variation in an instrument's price over time.

Volume

The number of units or contracts traded in an instrument over a given period.

W

Whipsaw

A sharp price move in one direction quickly followed by a reversal, often triggering stop-losses.

Y

Yield

The income return on an investment, usually expressed as an annual percentage.

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