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Forex glossary
21 trading terms in plain English. Each one links to the lesson that explains it in full.
Ask
The price at which the market sells to you, and so the price you pay when you buy. Also called the offer.
Base currency
The first currency in a pair. In EUR/USD it is the euro, and one unit of it is priced in the quote currency.
Bid
The price at which the market buys from you, and so the price you get when you sell.
Drawdown
The fall from an account's highest value to a later low, usually shown as a percentage.
Economic calendar
A list of scheduled data releases with their forecast and previous values.
Expectancy
The average result you can expect per trade, from your win rate and your average win and loss.
Forecast
The consensus estimate of economists before a data release. The released figure is compared against it.
Leverage
How much larger a position is than the money put up for it. At 30:1, every unit of deposit controls 30 units of trade.
Lot
A standard trade size. A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.
Margin
The money a broker holds to keep a leveraged position open. It is not a fee.
Margin call
A warning from the broker when account equity falls toward the level it requires to keep positions open.
Pip
The smallest standard price move in most currency pairs: the fourth decimal place (0.0001), or the second decimal place for pairs quoted in yen.
Pipette
One tenth of a pip, the fifth decimal place on most currency pairs.
Quote currency
The second currency in a pair. In EUR/USD it is the US dollar, which is what one euro costs.
Risk per trade
The share of the account you accept to lose on one trade, often 1% or less.
Risk-reward ratio
The possible profit on a trade compared with the possible loss, such as 2 to 1.
Slippage
The difference between the price you expected and the price you got, most often in fast markets.
Spread
The gap between the bid and the ask price. It is a cost you pay when you open a position.
Stop loss
An order that closes a position at a set price to limit the loss on that trade.
Swap
The interest charged or credited for holding a position past the broker's daily rollover time.
Take profit
An order that closes a position at a set price to lock in a gain.
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