If you’re ever stuck and need help to understand a particular term used in Forex trading, you’ve landed on the right page. We’ve listed a few key trading terms used in Forex trading. If you haven’t found the specific term on this page, then head to our detailed glossary section for a broader list of terms used generally in trading.
Asset: A financial entity which can be traded and invested in through buying and selling.
Buy: Opening a trading position with the expectation that the asset price will increase.
But Position: Buying an asset with the goal of selling it back at a higher price with profit.
CFD: Contract for Difference – a financial instrument that enables trading on the price differences of an underlying financial asset without needing to physically purchase it.
Commission: A position opening fee charged (or not) by brokers at their discretion.
Contract Size: The amount of asset bought.
Forex: Abbreviation of ‘foreign exchange’ – refers to buying and selling currencies against each other.
Hedging: A trading strategy which involves opening Buy and Sell Positions simultaneously with the idea that if the main position is losing, the profits from the alternative position will cover the losses.
Instrument: A financial trading entity which allows trading without actual purchase such as CFDs, options, futures, and forwards.
Leverage: A trading tool provided by the brokers to magnify the available capital and enable opening larger positions.
Long Position: Another term for a Buy position.
Loss: Experiencing a decrease in the account balance when a position is closed.
Margin: The amount of capital allocated in a position to open it.
Margin Call: A broker’s warning to a trader whose available margin is depleting to a point that the open positions cannot be maintained and will be closed automatically.
Portfolio: Our basket of financial assets which we are trading.
Pip Value: The amount of profit or loss accrued per pip movement, based on the position size.
Profit: Experiencing an increase in the account balance when a position is closed.
Risk Factor: A market event that can influence the prices of one or more assets in our trading portfolio.
Risk Management: A money management strategy to understand, analyse, and manage the risk exposure of our portfolio.
Risk/Return Ratio: A personal trading rule to determine the proportion between the expected return and the taken risk.
Rollover: Leaving a trading position open overnight to carry it to the next day.
Scalping: A trading strategy which involves opening and closing Buy and Sell positions within a few seconds to profit from minimal price movements.
Sell: Opening a trading position with the expectation that the asset price will decrease.
Sell Position: Selling an asset with the goal of buying it back at a lower price with profit.
Short Position: Another term for a Sell position.
Spread: The difference between Bid and Ask prices of a financial asset.
Swap: The interest paid or received from the rollover of a trading position.
Trading Plan: A written personal guideline outlining all elements of our trading activities.
Trading Psychology: The psychological phenomena experienced when trading.
Trading Strategy: A specific set of personal trading rules to apply when opening and closing positions in the financial markets.
Ask: The market’s Buy price for a financial asset.
Automated Trading Systems (ATS): An algorithmic computer software that automatizes the trading strategy by automatically analysing the markets and opening and closing positions, without the attendance of the trader.
Bid: The market’s Sell price for a financial asset.
Execution: Exercising of a market order.
Expert Advisor (EA): Expert Advisors are automated trading systems used on MetaTrader 4 and MetaTrader 5. EAs are algorithmic trading robots which either open and close positions for the trader or generate trading signals for the trader to use.
Lot: A term referring to the standard trading size of a financial asset.
Market Order: A regular trading position.
One-Click Trading: A trading platform feature which allows you to pre-determine position specifications and trade immediately by clicking Buy or Sell buttons.
Pending Order: A market order to open a Buy/Sell position when the market price of an asset reaches a predetermined value.
Pip: The increment decimal of the price of a financial asset. In Forex currency pairs, 4th or 2nd decimal; in non-Forex asset CFDs, the last digit of the price.
Pipette: The subordinate increment decimal of the price of a financial asset. In Forex currency pairs, the 5th decimal.
Price Chart: A technical chart which demonstrates the price changes over time in specific formats.
Stop Loss: A trading order to close a losing position at a predetermined price.
Take Profit: A trading order to close a profitable position at a predetermined price.
Indicator: An automatic analysis tool implemented into the price chart that measures changes in the quantitative characteristics of a financial asset.
Tick: A nominal price change caused by a specific number of trades in a single time point of the observed time window of the time chart.
Virtual Private Server (VPS): Virtual Private Servers allow the trading platform to continue running even when the trader exits the program – often utilised along with Expert Advisors.
Volume: Position size.
Account Manager: A representative of a broker whose responsibility is to conduct the communication between the broker and the client.
Anti-Money Laundering Policy (AML): A legal obligation of brokers to identify the sources of clients’ funds and ensure that they are not generated by or used for illegal activities.
Bonus: A trading tool, in form of extra funds to trade, awarded by a broker to a trader within certain rules and requirements.
Dealing Room: The trading department within the organisation of a broker which governs the trading activities of the clients.
Deposit: Transferring funds from an external account to the trading account balance.
Electronic Communications Networks (ECN): A type of broker which provides traders with direct access to liquidity providers.
Know-Your-Client (KYC): A legal obligation of brokers to verify the identity of their clients.
MAM/PAMM Accounts: Multi-Account Manager is an account type in MetaTrader 4 trading platform which allows Money Managers to trade for their clients and manage multiple accounts from a single platform.
Market Maker: A type of broker which does not give traders a direct access to the market but executes trades within its own system.
Regulation: An officially empowered governmental or autonomous organisation which supervises the business activities of brokers to ensure legal compliance and trader security.
Straight-Through Processing (STP): A type of broker which gives traders a direct access to other participants of the trading process by receiving price quotations from multiple providers.
Withdrawal: Transferring funds from the trading account balance to an external account.
Commodity: An underlying asset type for CFDs, referring to physical natural resources such as metals, energy, and agriculture.
Crude Oil: One of the most traded commodities; most-traded energy commodity; a major energy resource and industrial raw material.
Cryptocurrency: An underlying asset type for CFDs, referring to digital currencies that are used for online monetary transactions based on the blockchain technology.
Currency: Monetary unit of a country, representing the national economy.
Currency Pair: An underlying asset type for CFDs, referring to a trading instrument comprised of two currencies to exchange them directly against each other.
DJ30: One of the most traded U.S. stock indices, comprised of 30 biggest American companies by market value.
Exchange-Traded Fund (ETF): An underlying asset type for CFDs, referring to privately held funds and indices which can be traded in the stock exchanges like stocks.
Exotic Currency Pairs: Currency pairs that involve at least one currency that isn’t among major currencies.
Gold: One of the most traded commodities; most-traded metal commodity; a major industrial raw material and wealth symbol.
Major Currencies: Most traded currencies in the financial markets – American Dollar (USD), Euro (EUR), British Pound Sterling (GBP), Canadian Dollar (CAD), Swiss Franc (CHF), Japanese Yen (JPY), Australian Dollar (AUD), and New Zealand Dollar (NZD).
Major Currency Pairs: The most liquid currency pairs group comprised of the currency pairs between a major currency and USD (e.g., EUR/USD, USD/CAD).
Minor Currency Pairs: The second most liquid currency pairs group comprised of the currency pairs between two major currencies except USD (e.g., EUR/GBP, AUD/JPY).
NASDAQ100: One of the most traded U.S. stock indices, comprised of 100 biggest American companies traded in the Nasdaq Stock Exchange.
Safe Haven Assets: High-liquidity and low-volatility financial assets which are perceived as stable investment options and preferred by investors when the risk sentiment increases.
S&P 500: One of the most traded U.S. stock indices, comprised of 500 biggest American companies traded in the New York Stock Exchange.
Silver: One of the most traded commodities; second most-traded metal commodity; a major industrial raw material and wealth symbol.
Stock: An underlying asset type for CFDs, referring to the equity percentage of publicly traded shares of a company.
Stock Exchange: A venue to physically buy and sell stocks and other financial assets or instruments.
Stock Index: An underlying asset type for CFDs, referring to a basket of stocks formed to measure the performance of a stock exchange, a group of companies, or an industry as a whole.
Ticker Symbol: The trading symbol of a financial asset, derived as an abbreviation of its name, usually used for companies in the stock exchanges.
Treasury Bond: An underlying asset type for CFDs, referring to the time-bound debt contracts, issued by governments or companies, that involve lending money to the issuer in exchange of periodical interest payments.
Bar Chart: A technical price chart that shows the price changes within a time point in form of separate vertical bars and indicates opening and closing prices as hyphens.
Bear Market: A strong downtrend in the price of an asset.
Bull Market: A strong uptrend in the price of an asset.
Candlestick Chart: A technical price chart that shows the price changes within a time point in form of coloured rectangles that indicate the difference between opening and closing prices, and shadow lines that indicate the highest and lowest price points.
Chart Time: A technical price chart option which allows to divide the price changes into specific time windows.
Consumer Price Index (CPI): A fundamental economic indicator and inflation measure which gauges the change in the prices of consumer goods and products over time.
Dovish: A central bank’s approach to interest rate in terms of keeping them at lower levels.
Earnings Report: A fundamental economic indicator and company performance measure which informs about the revenue, profit, and earnings-per-share numbers of a company within a specific period (usually quarterly or yearly).
Earnings Season: A market event during which publicly traded companies publish their periodic earnings reports.
Economic Indicator: An economic report or data that gives information about the performance of a quantitative economic variable.
Employment/Unemployment Reports: Fundamental economic indicators which monitor the changes in the employment or unemployment levels in an economy.
Fundamental Analysis: A market analysis strategy which involves monitoring market events and the change in their performance over time.
Gross Domestic Product (GDP): A fundamental economic indicator and overall performance measure which gauges the change in the value of goods and products manufactured by a country.
Hawkish: A central bank’s approach to interest rate int terms of keeping them at high levels.
Interest Rate Decision: A fundamental economic indicator in which a central bank announces their decision for the interest rate they offer when borrowing or lending money.
Line Chart: A technical price chart that shows the price changes over time in form of a continuous line that includes only the closing prices in each time point.
Liquidity: A technical market information which shows the total trading volume of a financial asset in a given time period.
Market Event: A fundamental economic event that can affect the market prices of assets.
Quantitative Easing: A fundamental market event that refers to a specific monetary policy decision by a central bank to stimulate the economy by printing more money to buy debts.
Resistance Level: A technical indicator which marks the price levels which the asset previously struggled to break beyond when approaching from below.
Risk Sentiment: The psychological status of the market when it comes to taking or avoiding risks.
Support Level: A technical indicator which marks the price levels which the asset previously struggled to break beyond when approaching from above.
Technical Analysis: A market analysis strategy which involves monitoring price charts and the change in asset prices over time.
Technical Indicator: A trading tool to implement into price charts and assess market characteristics using mathematical formulas.
Trend: A price movement that formed a consistent pattern of a range of time.
Volatility: A technical market information which shows the speed and extent of changes in the price of a financial asset.