Forex Glossary
Your comprehensive guide to trading terminology. Understand the language of the markets.
Ask Price
The price at which a broker is willing to sell a currency pair. It is the price you pay to buy.
Base Currency
The first currency listed in a currency pair. For example, in EUR/USD, EUR is the base currency.
Bid Price
The price at which a broker is willing to buy a currency pair. It is the price you receive when you sell.
Broker
A firm that provides traders with access to a trading platform that allows them to buy and sell foreign currencies.
CFD (Contract for Difference)
A financial derivative that allows traders to speculate on the price movements of an underlying asset without actually owning it.
ECN (Electronic Communication Network)
A computerized system that automatically matches buy and sell orders for securities in the market.
Equity
The current value of your trading account, including your account balance and any floating profits or losses from open positions.
Forex (FX)
The foreign exchange market, where currencies are traded.
Free Margin
The amount of money in your trading account that is not currently tied up in open positions and can be used to open new trades.
Leverage
The use of borrowed funds from a broker to increase the potential return of an investment. It allows traders to control larger positions with a smaller amount of capital.
Liquidity
The degree to which an asset or security can be quickly bought or sold in the market without affecting its price.
Long Position
Buying a currency pair with the expectation that its value will increase.
Lot
The standardized quantity of a financial instrument being traded. In forex, a standard lot is 100,000 units of the base currency.
Margin
The amount of money required by a broker to open and maintain a leveraged position.
Margin Call
A warning from a broker that your account equity has dropped below the required margin level, and you must deposit more funds or close positions to avoid a stop-out.
Margin Level
The ratio of equity to used margin, expressed as a percentage. It indicates the health of your trading account.
Pip
Percentage in point. The smallest price move that a given exchange rate makes based on market convention.
Quote Currency
The second currency listed in a currency pair. For example, in EUR/USD, USD is the quote currency.
Short Position
Selling a currency pair with the expectation that its value will decrease.
Slippage
The difference between the expected price of a trade and the price at which the trade is actually executed.
Spread
The difference between the bid price and the ask price of a currency pair.
Stop-Loss Order
An order placed with a broker to buy or sell once the stock reaches a certain price. It is designed to limit an investor's loss on a position.
Stop-Out Level
The margin level at which a broker will automatically close your open positions to prevent your account balance from falling below zero.
Take-Profit Order
An order placed with a broker to close a position once it reaches a certain level of profit.
Volatility
A statistical measure of the dispersion of returns for a given security or market index. In forex, it refers to the amount of uncertainty or risk about the size of changes in a currency's exchange rate.