Glossary

Trading terms, decoded.

A plain-English guide to the words you will meet on the board — from ask and bid to swap and yield.

A

Ask — The price at which you can buy an instrument.

B

Base currency — The first currency in a pair — e.g. EUR in EUR/USD.

Bear market — A market in a sustained downtrend.

Bid — The price at which you can sell an instrument.

Bull market — A market in a sustained uptrend.

C

CFD — Contract for Difference — an agreement to exchange the price difference of an asset, letting you trade long or short with leverage.

Commission — A fee some accounts pay per trade, separate from the spread.

D

Drawdown — The drop from a peak in your account equity to a subsequent low.

E

Equity — Your balance plus or minus the profit/loss of open positions.

Expert Advisor — An automated strategy that runs on MetaTrader 4 (MQL4).

L

Leverage — Using borrowed capital to control a larger position with a smaller deposit.

Long — A buy position that profits if the price rises.

Lot — A standard unit of trade size — 100,000 units of the base currency in FX.

M

Margin — The deposit required to open and hold a leveraged position.

Margin call — A warning that equity is too low to support open positions.

P

Pip — The smallest standard price move in a currency pair.

Q

Quote currency — The second currency in a pair — e.g. USD in EUR/USD.

S

Short — A sell position that profits if the price falls.

Slippage — The difference between the expected and executed price.

Spread — The gap between the bid and ask price — the main cost of a trade.

Stop-loss — An order that closes a trade at a set loss level to cap risk.

Swap — Overnight financing applied to leveraged positions held past rollover.

T

Take-profit — An order that closes a trade at a set profit level.

V

Volatility — How much and how quickly a price moves.

Y

Yield — The return a bond pays relative to its price.

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