58 terms
A
- Ask
- The price you buy at: it applies when opening a trade in the buying direction, or when closing a sell position. The ask is higher than the bid; the difference is the spread.
B
- Balance
- The amount in the account excluding the unrealised profit and loss of open positions. It changes with the results of closed trades, deposits and withdrawals.
- Base currency
- The currency on the left of a pair. The price is given for one unit of this currency.
- Bid
- The price you sell at: it applies when opening a trade in the selling direction, or when closing a buy position.
C
- Candlestick chart
- A chart type in which each candle shows the open, high, low and close for the chosen period.
- Central bank
- The institution that runs monetary policy for a country or currency and sets the policy rate.
- Commission
- A fee charged per trade on some products and accounts, on top of the spread.
- Commodity
- A standardised raw material such as gold, oil or natural gas.
- Consensus forecast
- The expected value of a data release, compiled from economists' and analysts' forecasts beforehand. The market reaction often depends on the gap between this and the published figure.
- Consumer price index (CPI)
- An index measuring the change in price of a basket of goods and services bought by consumers; one of the most closely followed inflation measures.
- Contract for difference (CFD)
- A contract based on the difference between the opening and closing price of an asset, without owning the asset itself. It is a leveraged product and carries a high level of risk.
- Contract size
- The quantity of a product that one lot represents. For indices, commodities and shares it depends on the product and is stated in its product information.
- Cross pair
- Currency pairs that do not include the US dollar, such as EUR/GBP.
- Currency pair
- Two currencies priced against each other, such as EUR/USD. The price shows how many units of the quote currency one unit of the base currency is worth.
D
- Demo account
- An account with a virtual balance for trying the platform and order types without real money.
- Drawdown
- The fall in account value from a peak to the lowest point that follows; usually expressed as a percentage.
E
- Economic calendar
- A schedule listing the dates, times and expectations of economic data releases and central bank meetings.
- Employment report
- Data on the labour market such as job growth, the unemployment rate and wages. The monthly US non-farm payrolls report is followed closely.
- Equity
- The current value of the account: the balance plus the unrealised profit and loss of open positions.
F
- Free margin
- What remains of equity after the margin in use is deducted. It can be used for new positions and changes constantly with the result of open positions.
G
- Gap
- A jump in price from one level to another with no trading in between. It is often seen at the weekly open or after major news.
- Gross domestic product (GDP)
- The total value of goods and services produced in an economy over a period; it shows how fast the economy is growing.
I
- Index
- A measure that tracks the combined performance of a group of shares as a single value.
- Inflation
- A rise in the general level of prices for goods and services. It is one of the main indicators behind central bank rate decisions.
L
- Leverage
- The ratio between position size and the margin set aside. Leverage of 1:10 means margin of one tenth of the position's value; it magnifies gains and losses alike.
- Limit order
- A pending order to be filled only at a set price or better. If the price does not reach that level, it is not filled.
- Liquidity
- How easily a product can be bought or sold without moving its price much. When liquidity falls, spreads can widen and slippage can increase.
- Long position
- A position opened in the buying direction, aiming to gain from a rise in price. It loses if the price falls.
- Lot
- The unit used to express trade size. In forex, one standard lot is usually 100,000 units of the base currency; a mini lot is 10,000 and a micro lot 1,000 units.
M
- Major pair
- Pairs that combine the US dollar with one of the other most traded currencies, such as EUR/USD or USD/JPY.
- Margin
- The amount set aside in the account to keep a position open. It cannot be used for other trades until the position is closed.
- Margin call
- A warning the account receives when the margin level falls below a threshold set out in the account terms.
- Margin level
- The ratio of equity to the margin in use, usually shown as a percentage. The lower it falls, the less room the account has to absorb losses.
- Market order
- An order to be filled immediately at the best price available. In fast markets the fill price can differ from the one on screen.
- Moving average
- An indicator showing the average price over a set number of periods, updated with each new period. It lags behind the price.
O
- Overtrading
- Opening many trades that do not fit the plan, rest on weak reasons or come from an emotional reaction. It increases costs and risk.
P
- Pip
- The standard smallest unit of price movement in a currency pair. It is 0.0001 for most pairs and 0.01 for pairs that include the Japanese yen.
- Policy rate
- The key interest rate set by a central bank, which influences the cost of borrowing in the economy.
- Position size
- The size of a trade in lots or units. It determines how much a price move affects the account.
Q
- Quote currency
- The currency on the right of a pair. The price and the pip value are expressed in this currency.
R
- Resistance
- An area where rises in price have slowed or reversed in the past. It is not an exact line and can be broken through.
- Risk/reward ratio
- The ratio between the possible loss and the targeted profit of a trade. On its own it does not show whether a trade is good or bad.
S
- Short position
- A position opened in the selling direction, aiming to gain from a fall in price. It loses if the price rises.
- Slippage
- An order being filled at a price different from the one when it was placed. It is more common in fast or thinly traded markets.
- Spread
- The difference between the bid and the ask. It is a trading cost paid when a position is opened and can change with market conditions.
- Stop loss
- An order to close a position when the price reaches a set level against you. It helps limit losses, but on gaps it can be filled at a different price.
- Stop order
- A pending order that becomes a market order when the price reaches a set level. The fill price can differ from that level.
- Stop out
- The automatic closing of open positions when the margin level falls to a lower threshold. It is applied to limit further losses.
- Support
- An area where falls in price have slowed or reversed in the past. It is not an exact line and can break.
- Swap
- An overnight financing amount applied to positions held past the end of the trading day. It can be positive or negative.
T
- Take profit
- An order to close a position when the price reaches a set level in your favour.
- Timeframe
- The period each candle or bar on a chart covers, such as one hour or one day.
- Trading journal
- A record of each trade's reason, entry and exit, result and the thinking at the time.
- Trading plan
- Written rules setting out in advance which products to trade, under what conditions and with how much risk.
- Trading session
- The hours during which a given financial centre is active, such as the Asian, European and North American sessions.
- Trailing stop
- A stop-loss order that follows the price at a set distance as it moves in your favour. When the price turns back, it stays at the last level reached.
- Trend
- Price moving broadly in the same direction over a period. Rising highs and lows indicate an upward trend; falling highs and lows a downward one.
V
- Volatility
- A measure of how much and how fast a price changes over a period. High volatility magnifies both possible gains and possible losses.
The term is in place; now the practice.
Every concept you see in the glossary is taught in a lesson, gets a date in the calendar and turns into a price on a market page.
The lessons, in order
Nine lessons run from the basics to discipline; start with the first, the next one is at the foot of every page.
Economic calendar guide
How to read an economic calendar and what its impact levels tell you.
Markets
The indicative prices of the eight classes and how each one works; where the terms turn into prices.
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