Trading Glossary

Trading with borrowed capital that multiplies your market exposure. For example, 1:100 leverage lets a $250 deposit control a $25,000 position. It magnifies both profits and losses, so it must be managed carefully.

The amount of your own money required to open and maintain a leveraged position. It acts as a security deposit; if losses erode it below the maintenance level, a margin call follows.

A notification from the broker that your account equity has fallen below the required margin. You must add funds or close positions, otherwise the broker may close them automatically.

The difference between the buy (ask) and sell (bid) price of an instrument. It is the primary cost of opening a trade — tighter spreads mean lower trading costs.

The smallest standard price movement in a currency pair, usually the fourth decimal place (0.0001). Profits, losses, and spreads in forex are commonly measured in pips.

The standardized size of a trade. A standard lot in forex is 100,000 units of the base currency; mini (10,000) and micro (1,000) lots allow smaller position sizing.

The bid is the highest price buyers will pay; the ask is the lowest price sellers will accept. You buy at the ask and sell at the bid, and the gap between them is the spread.

Going long means buying because you expect the price to rise. Going short means selling because you expect it to fall — CFDs allow you to profit in both directions.

How sharply and quickly a price moves. High volatility means larger, faster swings — more opportunity, but also more risk per trade.

How easily an instrument can be bought or sold without moving its price. Major forex pairs are highly liquid; exotic pairs and small-cap assets are less so, often with wider spreads.

The difference between the expected price of a trade and the price at which it actually executes, usually during fast-moving or illiquid markets.

The overnight financing charge or credit applied when a leveraged position is held past the daily market close, based on the interest rate differential between the two currencies.

An instruction to buy or sell immediately at the best available current price. It guarantees execution, but not an exact price.

An order to buy or sell at a specific price or better. It only executes if the market reaches your chosen level, giving price control but no execution guarantee.

An order that triggers a market order once a specified price is reached, commonly used to enter breakouts or protect existing positions.

A protective order that automatically closes a losing trade at a predefined price, capping your downside on every position.

An order that automatically closes a winning trade at a predefined price, locking in profits without needing to watch the screen.

A stop-loss that automatically follows the price as it moves in your favor, protecting accumulated profit while leaving room for further gains.

Any order set to execute in the future when the market reaches a specified price — includes limit and stop entries placed away from the current price.

The process by which your broker fills your order in the market. Fast, reliable execution reduces slippage and ensures you get the prices you see.

The relationship between a trade's potential loss and potential gain. A 1:3 ratio means risking $1 to make $3 — professional traders rarely take setups below 1:2.

Calculating how large a trade should be based on your account size and the amount you're willing to risk, typically 1–2% of equity per trade.

The real-time value of your account: balance plus or minus the floating profit or loss of all open positions.

The peak-to-trough decline of your account value, expressed as a percentage. Keeping drawdowns small is the key to long-term survival in trading.

Opening a position that offsets the risk of another — for example, holding opposite trades in correlated instruments to reduce overall exposure.

Spreading capital across different instruments and markets so that a single adverse move cannot seriously damage the whole portfolio.

The equity threshold at which the broker automatically closes your positions to prevent the account from going negative. Understanding it protects you from forced liquidation.

Forecasting future price movement by studying charts, patterns, indicators, and historical price behavior rather than economic data.

Evaluating an asset's value through economic data — interest rates, inflation, employment, GDP, and central bank policy — to anticipate longer-term direction.

Price levels where the market has repeatedly paused or reversed. Support acts as a floor where buying emerges; resistance acts as a ceiling where selling appears.

The dominant direction of price movement — up, down, or sideways. 'The trend is your friend': most strategies perform best when aligned with it.

A chart element showing the open, high, low, and close for a period. Patterns formed by candlesticks help traders read market sentiment at a glance.

A mathematical overlay applied to price charts — such as moving averages, RSI, or MACD — to help identify trends, momentum, and potential turning points.

When price moves decisively beyond an established support or resistance level, often signaling the start of a new directional move.

A widely followed gauge of expected stock-market volatility, often called the 'fear index'. Rising values signal growing uncertainty and wider price swings.

A derivative that lets you speculate on price movements without owning the underlying asset, profiting from both rising and falling markets with leverage.

The global currency market — the largest and most liquid market in the world, trading over $7 trillion daily, open 24 hours a day, five days a week.

Two currencies quoted against each other, such as EUR/USD. The first is the base currency, the second the quote currency; the price shows how much quote currency buys one unit of base.

Majors include the US dollar and the most traded currencies (EUR/USD, GBP/USD). Minors exclude the dollar (EUR/GBP). Exotics pair a major with an emerging-market currency and carry wider spreads.

Raw materials traded on global markets — gold, silver, crude oil, natural gas. Gold in particular is a classic safe-haven asset during uncertainty.

Baskets of leading stocks representing a market or economy — such as the S&P 500, NASDAQ 100, or DAX 40 — tradable as a single instrument.

Digital assets like Bitcoin and Ethereum traded around the clock. Known for high volatility, they offer significant opportunity alongside elevated risk.

Units of ownership in a company. Trading share CFDs lets you speculate on individual company performance without purchasing the shares outright.

A fund that trades on an exchange like a single stock while holding a diversified basket of assets — an efficient way to access whole sectors or markets.