Trading Terms Explained
Comprehensive glossary of trading terms and concepts to help you understand the markets.
The total amount of money in your trading account, including all open positions and pending orders.
The price at which you can buy a currency pair. Also known as the "offer" or "sell" price. It's always higher than the bid price.
Any financial instrument that can be traded, including currencies, stocks, commodities, indices, and cryptocurrencies.
An option where the strike price equals the current market price of the underlying asset.
A strategy where a trader buys more of an asset as its price falls, lowering the average entry price.
The first currency in a currency pair. In EUR/USD, EUR is the base currency. The base currency value is always 1.
A market condition characterized by falling prices and pessimistic sentiment. Traders who expect prices to fall are called "bears."
The price at which you can sell a currency pair. It's always lower than the ask price. The difference between bid and ask is the spread.
A market condition characterized by rising prices and optimistic sentiment. Traders who expect prices to rise are called "bulls."
A financial intermediary that facilitates trading between traders and the market. Brokers provide trading platforms and access to financial markets.
A charting method that displays price movements using candlestick shapes. Each candlestick shows open, high, low, and close prices for a time period.
A derivative product that allows traders to speculate on price movements without owning the underlying asset. Profits/losses are based on the price difference.
A fee charged by brokers for executing trades. Some brokers charge commissions instead of or in addition to spreads.
Two currencies quoted together in forex trading. The first currency is the base currency, and the second is the quote currency (e.g., EUR/USD).
A currency pair that doesn't include the US dollar, such as EUR/GBP or GBP/JPY. Also known as "cross pairs" or "minor pairs."
A trading strategy where positions are opened and closed within the same trading day, with no positions held overnight.
A practice trading account that uses virtual money, allowing traders to learn and test strategies without risking real capital.
Money added to your trading account. Deposits can be made via bank transfer, credit card, e-wallet, or cryptocurrency.
The peak-to-trough decline in account value during a losing streak. It measures the maximum loss from a peak before a new peak is achieved.
A trading system that connects traders directly with liquidity providers, offering raw spreads with commission-based pricing.
The current value of your trading account, calculated as: Balance + Floating Profit/Loss. It represents your account's real-time value.
The price at which one currency can be exchanged for another. It's the value of the base currency expressed in terms of the quote currency.
The process of completing a trade order. Fast execution is crucial for getting the desired price, especially in volatile markets.
A currency pair involving a major currency and a currency from an emerging economy, such as USD/TRY or EUR/ZAR. Typically has wider spreads.
A technical analysis tool using horizontal lines at key Fibonacci levels (23.6%, 38.2%, 50%, 61.8%, 78.6%) to identify potential support and resistance levels.
Unrealized profit or loss on open positions. The profit/loss changes as market prices move and becomes realized when the position is closed.
The foreign exchange market where currencies are traded. It's the largest and most liquid financial market in the world, operating 24 hours a day.
Available funds in your account that can be used to open new positions. Calculated as: Equity - Used Margin.
Analysis of economic, social, and political factors that affect currency values, including GDP, interest rates, employment data, and geopolitical events.
A price jump where no trading occurs, creating a gap on the chart. Common after weekend market closures or major news events.
Buying a currency pair with the expectation that its price will rise. Also called "taking a long position" or simply "buying."
Selling a currency pair with the expectation that its price will fall. Also called "taking a short position" or simply "selling."
A risk management strategy where a trader opens an opposite position to reduce exposure to price movements. Can protect against losses but also limits profits.
The highest price reached by an asset during a specific time period (e.g., daily high, weekly high).
A mathematical calculation based on price and/or volume data, used to predict future price movements. Examples: RSI, MACD, Moving Averages.
The minimum amount of money required to open a leveraged position. It's a percentage of the total position value.
An option that has intrinsic value. For a call option, it's when the strike price is below the market price. For a put option, it's when the strike price is above the market price.
The cost of borrowing money or the return on lending. Central bank interest rates significantly influence currency values.
A term for a day trader who makes quick trades to profit from small price movements, typically closing positions within minutes or hours.
A regulatory requirement where brokers verify the identity of their clients through documentation to prevent fraud and money laundering.
A tool that allows traders to control larger positions with a smaller amount of capital. Expressed as a ratio (e.g., 1:100 means controlling $100,000 with $1,000).
An order to buy or sell at a specific price or better. A buy limit is placed below the current price, and a sell limit is placed above.
The ease with which an asset can be bought or sold without affecting its price. High liquidity means easier trading with tighter spreads.
A position where you buy a currency pair expecting its price to rise. You profit when the price increases and lose when it decreases.
The standard unit size of a forex trade. Standard lot = 100,000 units, Mini lot = 10,000 units, Micro lot = 1,000 units.
The lowest price reached by an asset during a specific time period (e.g., daily low, weekly low).
The most traded currency pairs, all involving the US dollar: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD, NZD/USD.
The amount of money required in your account to open and maintain a leveraged position. It's a deposit or collateral held by the broker.
A broker's notification when your account equity falls below the required margin level. You may need to deposit more funds or close positions.
A ratio showing the health of your account: (Equity / Used Margin) × 100%. A margin level below 100% may trigger a margin call.
An order to buy or sell immediately at the current market price. Also called an "at market" order.
A technical indicator that smooths price data by creating a constantly updated average price over a specific period (e.g., 50-day, 200-day MA).
A trading strategy based on trading around major economic news releases and events that can cause significant price movements.
A broker model where orders are passed directly to liquidity providers without a dealing desk, typically offering better spreads and faster execution.
An active trade that has been opened but not yet closed. The position remains open until it's closed or stopped out.
An instruction to buy or sell a financial instrument. Types include market orders, limit orders, stop orders, and stop-limit orders.
An option with no intrinsic value. For a call option, it's when the strike price is above the market price. For a put option, it's when the strike price is below the market price.
A market condition where prices have risen too high and too fast, suggesting a potential downward correction. Often identified by technical indicators like RSI above 70.
A market condition where prices have fallen too low and too fast, suggesting a potential upward correction. Often identified by technical indicators like RSI below 30.
An order placed to buy or sell at a future price when certain conditions are met. Types include limit orders and stop orders.
Percentage in Point - the smallest price movement in a currency pair. For most pairs, 1 pip = 0.0001. For JPY pairs, 1 pip = 0.01.
A fractional pip, equal to one-tenth of a pip (0.00001 for most pairs, 0.001 for JPY pairs). Also called a "point."
A trade that has been opened. Can be long (buy) or short (sell). The position remains active until closed.
The number of lots or units traded in a position. Proper position sizing is crucial for risk management.
A trading method that relies on analyzing raw price movements without indicators, focusing on candlestick patterns and support/resistance levels.
The second currency in a currency pair. In EUR/USD, USD is the quote currency. It shows how much of the quote currency is needed to buy one unit of the base currency.
A market condition where prices move sideways between support and resistance levels without a clear trend direction.
A price level where selling pressure is strong enough to prevent prices from rising further. Often acts as a ceiling for price movements.
Strategies and techniques used to minimize trading losses, including position sizing, stop losses, and risk-reward ratios.
A comparison of potential profit to potential loss. A 1:2 ratio means risking $1 to make $2. Higher ratios are generally preferred.
A momentum oscillator that measures the speed and magnitude of price changes. Values above 70 indicate overbought conditions, below 30 indicate oversold.
A trading strategy involving very short-term trades (seconds to minutes) to profit from small price movements. Requires quick execution and tight spreads.
A position where you sell a currency pair expecting its price to fall. You profit when the price decreases and lose when it increases.
The difference between the expected price and the actual execution price of an order. Common during high volatility or low liquidity.
The difference between the bid (sell) price and ask (buy) price. It's measured in pips and represents the broker's commission. Tighter spreads mean lower trading costs.
A pending order that automatically closes a position at a predetermined price to limit losses. Essential for risk management.
An order that becomes a market order when a specified price is reached. A buy stop is placed above current price, a sell stop below.
A price level where buying pressure is strong enough to prevent prices from falling further. Often acts as a floor for price movements.
The interest paid or earned for holding a position overnight. Also called "rollover" or "overnight financing." Can be positive or negative depending on interest rate differentials.
An Islamic account that doesn't charge or pay swap interest, making it compliant with Sharia law. Also called an "Islamic account."
A pending order that automatically closes a position at a predetermined price to lock in profits. Helps traders secure gains without constant monitoring.
Analysis of price charts and technical indicators to predict future price movements. Focuses on patterns, trends, and market psychology.
The smallest possible price movement of an asset. In forex, a tick is typically one pip or one pipette.
The general direction of price movement. An uptrend has higher highs and higher lows. A downtrend has lower highs and lower lows.
Software used to execute trades, analyze markets, and manage accounts. Popular platforms include MetaTrader 5, WebTrader, and mobile apps.
The time period when a particular market is open. Major sessions include Asian (Tokyo), European (London), and US (New York) sessions.
The amount of margin currently locked in open positions. It cannot be used to open new positions until those positions are closed.
The degree of price variation over time. High volatility means large price swings, while low volatility means smaller, more stable movements.
The number of contracts or lots traded during a specific period. Higher volume often indicates stronger price movements and better liquidity.
The process of removing funds from your trading account. Withdrawals are typically processed to the same method used for deposits.
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