103 trading terms, explained clearly.

Ask

Price at which the dealer is willing to sell the base instrument; typically the price used to open a long position.

At-the-money

An options term describing a strike approximately equal to the reference price; exact definitions depend on the contract.

Average True Range (ATR)

A moving average of true range, which includes gaps from the previous close; a volatility measure, not a direction forecast.

Backtest

Historical simulation of predefined trading rules, ideally including execution costs and avoiding hindsight bias.

Balance

Booked cash and realised outcomes in an account; open profit or loss may affect equity without yet affecting balance.

Base currency

The first currency in a pair such as EUR in EUR/USD; one unit of base is priced in the quote currency.

Basis point (bp)

One hundredth of one percentage point; 25 basis points equals 0.25 percentage points.

Bear market

A broad, sustained market decline; exact thresholds differ by market and publisher.

Bid

The price at which the dealer is willing to buy an instrument; typically the price used to exit a long position.

Binary option

A yes/no outcome contract with a predetermined payout if a specified condition holds at expiry, otherwise typically a loss of stake.

Break-even win rate

The minimum average win probability required to cover average wins and losses before costs; for binary net payout b, equals 1/(1+b).

Broker

A firm or intermediary providing access to trading services; the contracting legal entity and licensing status must be verified.

Capital at risk

Money that could be lost under adverse conditions; may exceed planned stop loss when gaps or fill problems occur.

Central bank

Public monetary authority that manages key interest-rate or policy instruments within its mandate.

CFD (Contract for Difference)

A derivative typically settling the difference between entry and exit prices without transferring ownership of the underlying asset.

Commission

Explicit fee charged for execution or services, often separately from the spread.

Compound return

Return calculated on a balance that includes previous gains and losses; account value evolves multiplicatively.

Consumer Price Index (CPI)

A measure of price changes for a specified basket of consumer goods and services; methods vary by statistics authority.

Contract size

Quantity of underlying exposure represented by one contract or lot; crucial for monetary tick/pip values.

Correlation

Statistical tendency for two series to move together over a specified sample; the relationship can change.

Counterparty

The other party to a financial contract, whose performance and solvency affect the contract.

Cross-currency pair

A pair of currencies that does not include the US dollar, for example EUR/GBP.

Daily drawdown

Drop in account value over a specified daily baseline; challenge and broker rule definitions can differ.

Day order

An order that normally expires at the end of the specified trading session if not filled.

Demo account

Practice environment using simulated balances; fills and emotions can differ from live conditions.

Derivative

A contract whose value depends on an underlying reference asset, rate, index or event.

Dividend adjustment

Contract-specific cash adjustment on some equity/index CFD positions associated with underlying dividends.

Drawdown

Decline from a previous equity or balance peak to a subsequent low.

Economic calendar

Schedule of statistics, central-bank decisions and other market-relevant releases, often with expected and actual values.

EMA (Exponential Moving Average)

A moving average placing greater weight on recent observations; it still uses past data.

Equity

Account balance plus unrealised gains/losses and other applicable adjustments.

Exchange rate

The price of one currency in units of another, subject to bid/ask conventions and trading conditions.

Execution

Process by which an order becomes a trade, possibly with a fill different from the displayed or requested price.

Expectancy

Average estimated net result per trade across outcomes, ideally after all trading costs.

Exposure

Economic sensitivity to a market move; several positions can share an underlying risk factor.

Fill

An executed order or portion of an order, with a confirmed price, amount and time.

Financing

Funding cost or credit potentially applying to positions held overnight in leveraged products.

Fixed-outcome option

A contract paying a predetermined amount based on a specified event rather than a continuous exposure to price movement.

Forward test

Recording performance of a frozen strategy against new future observations, rather than adapting it to historical results.

Free margin

Equity not currently committed to required margin; it is not a safe amount to risk.

Fundamental analysis

Study of economic, financial and institutional factors that may influence market valuations.

Gap

Difference between one tradable price and the next observed tradable price without intermediate fills.

Guaranteed stop

A specific contractual stop arrangement promising an execution price under defined terms, usually with restrictions or fees; not all platforms offer it.

Hedging

Offsetting an existing exposure with another position; hedges can have basis risk and cost.

High-impact event

Calendar provider label for potentially important news; it does not guarantee a large market reaction.

Inflation

Persistent increase in a general price index over a measurement period; not identical to a single product becoming expensive.

Initial margin

Collateral required to open a leveraged position; different from the total potential loss.

Interbank market

Network of institutions transacting wholesale currencies; retail CFD orders may not trade directly within it.

Jurisdiction

Country or legal authority governing a specific customer relationship or financial service.

KYC (Know Your Customer)

Identity and background verification applied by regulated financial institutions and payment providers.

Leverage

Ratio of controlled notional exposure to margin or capital; it can amplify losses.

Limit order

Order specifying the worst acceptable price or better; execution is not assured.

Liquidity

Ability to trade without excessively affecting the price or waiting for a counterparty.

Long position

A position generally benefiting from an increase in its reference instrument, before costs.

Lot

A platform-defined trade volume unit; Forex and index/metal CFDs can have different contract multipliers.

Margin call

Notification or margin-control event when account resources become insufficient under the provider rules.

Market order

Instruction to execute promptly at available terms, not necessarily the last displayed price.

Maximum drawdown

Largest historical peak-to-trough decline in the observed account or strategy record.

Momentum

Persistence or strength of recent directional movement, often summarised by technical indicators.

Moving average

Historical-price smoothing statistic used to describe recent tendencies, not a guarantee about the future.

Multiple R

Trade result divided by initial planned monetary risk; +2R means two units of risk earned before fees.

Negative balance protection

A jurisdiction/entity-specific contractual or regulatory safeguard that may limit losses below deposited funds; verify coverage.

Net profit

Result after applicable spreads, commissions, financing and other trading costs.

News surprise

Difference between released value and market consensus; market impact depends on positioning and context.

NFP (Nonfarm Payrolls)

A US labour-market survey estimate of payroll employment change, part of the employment situation release.

Notional value

Underlying economic exposure represented by a derivative position, which may exceed margin.

OCO (One-Cancels-the-Other)

Conditional arrangement where execution of one order cancels another, if supported by the platform.

Open interest

Number of outstanding derivatives contracts in a market with central reporting; distinct from trading volume.

Order book

Displayed or implied collection of bids and asks; retail OTC quotes are not necessarily a full exchange book.

OTC (Over the Counter)

Contracts negotiated between counterparties instead of traded on a central exchange.

Overfitting

Adjusting a model excessively to historical noise so it performs poorly on new observations.

Overnight swap

Broker-specific debit or credit for carrying a position across rollover; schedule and sign can vary.

Pip

Conventional smallest unit used to describe Forex price changes, typically 0.0001 for most pairs and 0.01 for many JPY pairs.

Pipette

One-tenth of a pip on many five-decimal Forex quotes.

Position sizing

Selecting contract quantity so estimated monetary loss at a stop remains within a budget.

Quote currency

Second currency in a pair; the unit used to express the value of one base currency.

R-multiple

Net or gross result expressed as a multiple of predefined trade risk, with the convention stated clearly.

Range

Trading environment in which prices oscillate within a region rather than sustaining a trend.

Requote

Platform message offering or requesting a different price instead of executing at the requested one.

Resistance

Price zone where previous supply or selling activity may have concentrated; not a guaranteed ceiling.

Risk–reward ratio

Comparison of planned potential loss and gain, not a statistical estimate of win probability.

RSI (Relative Strength Index)

Momentum indicator comparing magnitudes of recent advances and declines on a bounded scale.

Scalping

Strategy style involving many short holding periods; highly sensitive to costs and execution quality.

Short position

A position generally benefiting from a fall in the reference instrument, subject to contract rules and costs.

Slippage

Difference between requested/triggered and realised execution prices, favourable or unfavourable.

SMA (Simple Moving Average)

Arithmetic mean of prices over a fixed lookback period.

Spot Forex

Transactions referencing current currency exchange rates, typically settling under market conventions; retail rolling products differ.

Spread

Difference between the offer/ask and bid quotes at a moment in time.

Stop-limit order

Stop-triggered instruction that then acts as a price-limited order, which may remain unfilled during a gap.

Stop-loss order

Instruction intended to limit loss by triggering an exit, subject to execution and gap conditions.

Support

Price zone where buying has previously appeared; not a guaranteed floor.

Swap-free account

Account marketed without conventional overnight swaps but may have alternate charges or restrictions.

Synthetic index

Broker-defined market product generated under a provider-specific methodology, not an ordinary spot currency.

Technical analysis

Description of price, volume or indicator patterns, requiring testing and risk control before use.

Tick

Minimum price increment or one market-price update depending on context; verify platform terminology.

Tick value

Monetary value of one specified tick for a given contract size and currency conversion.

Trading plan

Predefined rules for markets, setups, entries, exits, risk and performance evaluation.

Trailing stop

A stop level that may move favourably as price moves, following predefined distance or rule.

Unrealised P/L

Mark-to-market gain or loss on still-open positions.

Volatility

Degree of price variation over a period; measured by several different statistics.

Volume

Quantity traded or platform activity measure; OTC spot Forex lacks a universally consolidated exchange volume.

Win rate

Fraction of completed trades that are profitable; cannot determine performance without payoff sizes and costs.

XAUUSD

Gold quoted against the US dollar; a retail contract may be a derivative rather than physical bullion.

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