Forex & CFD Trading Glossary
Plain-English definitions of the forex and CFD terms every trader should know — from spreads and pips to leverage, margin and ECN execution.
Ask Price The price at which the market (or your broker) will sell a currency pair to you — the hi… Balance The cash in your trading account, excluding the profit or loss of positions that are sti… Base Currency The first currency in a pair (EUR in EUR/USD). Its price is quoted in terms of the secon… Base Rate The benchmark interest rate set by a central bank, which strongly influences a currency'… Bear Market A market with sustained falling prices and negative sentiment. A 'bearish' trader expect… Bid Price The price at which the market will buy a currency pair from you — the lower side of the … Bollinger Bands A volatility indicator plotting bands above and below a moving average to show when pric… Bull Market A market with sustained rising prices and positive sentiment. A 'bullish' trader expects… Candlestick A chart element showing the open, high, low and close of a price over a period, widely u… Central Bank The institution that manages a country's monetary policy and interest rates, such as the… CFD A Contract for Difference — a derivative that lets you speculate on an asset's price wit… Commission A fixed fee charged per lot on raw-spread or ECN accounts, in exchange for tighter sprea… Copy Trading Automatically mirroring the trades of another, usually more experienced, trader in your … cTrader A trading platform popular with ECN brokers, offering advanced order types, depth-of-mar… Currency Pair Two currencies quoted together, showing how much of the quote currency buys one unit of … Day Trading Opening and closing positions within the same trading day to avoid overnight risk and sw… Dealing Desk A broker desk that manages and may take the opposite side of client orders. 'No dealing … Depth of Market A view of the outstanding buy and sell orders at different price levels, indicating avai… Drawdown The peak-to-trough decline in your account equity, showing how much you lost from a high… ECN An Electronic Communication Network that connects traders directly to liquidity provider… Economic Calendar A schedule of upcoming economic data releases and events that can move the markets, used… Equity The real-time value of your account: your balance plus or minus the profit/loss of any o… Execution The process of completing a buy or sell order. Fast, reliable execution reduces slippage… Exotic Pairs Pairs combining a major currency with a smaller or emerging-market currency, such as USD… Expert Advisor (EA) An automated trading program that runs on MetaTrader to execute a strategy without manua… Fibonacci Retracement A tool using key ratios (38.2%, 50%, 61.8%) to identify potential support and resistance… Forex The foreign exchange market, where currencies are traded against each other. It is the l… Free Margin The equity available to open new positions — total equity minus the margin already used. Fundamental Analysis Evaluating economic data, interest rates and news to judge a currency's intrinsic value … Hedging Opening a position to offset the risk of another, reducing exposure to adverse price mov… Inflation The rate at which prices rise over time. Central banks adjust interest rates to manage i… Interest Rate The cost of borrowing a currency, set by its central bank. Higher rates tend to attract … KYC Know Your Customer — the identity and address verification brokers must perform before y… Leverage Borrowed capital that lets you control a position larger than your deposit. 1:100 levera… Limit Order An instruction to buy or sell only at a specified price or better, rather than at the cu… Liquidity How easily an asset can be bought or sold without moving its price. Highly liquid market… Long Position A buy trade opened in the expectation that the price will rise. You profit if the market… Lot A standardised trade size. One standard lot is 100,000 units of the base currency; a min… MACD Moving Average Convergence Divergence — a momentum indicator showing the relationship be… Major Pairs The most traded currency pairs, all including the US dollar — such as EUR/USD, GBP/USD, … Margin The deposit required to open and maintain a leveraged position. It is a fraction of the … Margin Call A warning from your broker that your account equity has fallen close to the required mar… Market Maker A broker that sets its own bid and ask prices and may take the other side of client trad… Market Order An instruction to buy or sell immediately at the best currently available price. MetaTrader 4 (MT4) The most widely used retail forex platform, known for its charting, automated trading (e… MetaTrader 5 (MT5) The successor to MT4, adding more timeframes, order types, an economic calendar and mult… Minor Pairs Actively traded pairs that do not include the US dollar, such as EUR/GBP or EUR/JPY. Als… Moving Average An indicator that smooths price data over a set period to reveal the underlying trend di… Negative Balance Protection A safeguard ensuring you cannot lose more than your account balance, even after extreme … Non-Farm Payrolls A closely watched US employment report released monthly that often causes sharp moves in… Order Book A real-time list of buy and sell orders for an instrument, showing market depth and liqu… Overnight Financing The cost or credit applied for holding a leveraged CFD position past the daily cut-off t… Pip The smallest standard price move in a currency pair, typically the fourth decimal place … Pipette A fractional pip — one tenth of a pip (the fifth decimal place). Many brokers quote pric… Position Sizing Deciding how large a trade to place based on your account size and the risk you accept p… Quote Currency The second currency in a pair (USD in EUR/USD). It expresses how much of it is needed to… Regulation Oversight of a broker by a financial authority (such as the FCA, CySEC or ASIC) that enf… Requote When a broker cannot fill your order at the requested price and offers a new one, usuall… Resistance A price level where selling interest has historically been strong enough to halt or reve… Risk/Reward Ratio The ratio between the potential loss and potential profit of a trade — for example riski… RSI The Relative Strength Index, a momentum oscillator from 0–100 used to spot overbought (a… Scalping A short-term strategy of taking many small profits from tiny price moves, holding positi… Segregated Accounts Client funds held separately from a broker's own money, protecting them if the broker be… Short Position A sell trade opened in the expectation that the price will fall. You profit if the marke… Slippage The difference between the expected price of a trade and the price at which it is actual… Spread The difference between the bid and ask price, usually measured in pips. It is the main c… Spread Betting A leveraged way to bet on price movements, tax-free in some jurisdictions like the UK, w… Stop-Loss Order An order that automatically closes a position at a set price to cap your loss if the mar… Stop-Out Level The equity threshold at which a broker automatically closes your positions to prevent yo… STP Straight-Through Processing — a model where the broker routes client orders directly to … Support A price level where buying interest has historically been strong enough to halt or rever… Swap / Rollover The interest paid or earned for holding a leveraged position overnight, based on the int… Swap-Free Account An Islamic account that replaces overnight swap interest with a fixed administrative fee… Swing Trading Holding positions for several days to weeks to capture larger price swings, using techni… Take-Profit Order An order that automatically closes a position once it reaches a target profit level. Technical Analysis Studying price charts, patterns and indicators to forecast future price movements based … Trailing Stop A stop-loss that moves with the market in your favour, locking in profit while limiting … Trend The general direction of a market over time — upward (bullish), downward (bearish) or si… Volatility The degree to which a price moves up and down over time. Higher volatility means larger …
