Trading Glossary
A
Ask / Offer Price
The price at which a seller is willing to sell an asset (or the price a trader pays when entering a long position). The ask is always higher than the bid. “Ask” is the opposite of “bid.”
In your own words: ________________
Appreciation
An increase in the value of an asset or currency over time. In forex, it means the base currency is gaining value relative to the quote currency.
In your own words: ________________
Arbitrage
The practice of simultaneously buying and selling an asset in different markets to profit from price differences.
In your own words: ________________
Average True Range (ATR)
A technical indicator measuring volatility. It calculates the average of true ranges over a set period (high–low, or gaps) to show how much price moves, on average.
In your own words: ________________
B
Backtesting
Simulating a trading strategy on historical data to see how it would have performed in past markets.
In your own words: ________________
Balance (Account Balance)
The total funds in a trading account excluding unrealized profit or loss from open trades.
In your own words: ________________
Base Currency
In a currency pair (e.g. EUR/USD), the first currency is the “base.” It’s the currency you are buying or selling.
In your own words: ________________
Bid Price
The price at which a buyer is willing to buy (or the price you get when you sell). It is lower than the ask price.
In your own words: ________________
Breakout
When price moves beyond a defined resistance or support level, often with increased momentum. A breakout suggests a possible new trend direction.
In your own words: ________________
Bullish / Bull Market
Expecting or showing upward movement; belief that prices will rise.
In your own words: ________________
C
Carry Trade
A strategy where a trader borrows (goes short) in a currency with a low interest rate and invests (goes long) in a currency with a higher interest rate, aiming to profit from the rate differential.
In your own words: ________________
Candlestick
A chart method showing the open, high, low, and close for a time period. The “body” shows open vs. close; the “wicks” or “shadows” show extremes.
In your own words: ________________
Chart
A visual representation of price movement over time (line, bar, candlestick charts).
In your own words: ________________
Contract (Futures Contract)
A standardized agreement to buy or sell a particular asset at a future date and price.
In your own words: ________________
Correlation
A statistical measure of how two assets move relative to each other (positive correlation means they move together; negative means they move opposite).
In your own words: ________________
Credit / Swap / Rollover
When holding a forex position overnight, there is an interest payment or credit applied based on the interest rate differential between the two currencies. Also called “rollover.” Wikipedia
In your own words: ________________
D
Day Order
An order (limit or stop) that expires if it is not filled by the end of the trading day.
In your own words: ________________
Day Trading
Opening and closing trades within the same trading day, avoiding overnight exposure.
In your own words: ________________
Depreciation
A decrease in the value of an asset or currency over time. In forex, the base currency weakens relative to the quote currency.
In your own words: ________________
Drawdown
The decline from a peak in account equity or balance to a subsequent trough. It measures risk (how much you lose during losing periods).
In your own words: ________________
E
Entry / Entry Point
The price or moment at which a trader enters a trade (long or short).
In your own words: ________________
Execution
The actual filling of a trade order (when a buy or sell order is accepted at a certain price).
In your own words: ________________
Exotic Pair
A currency pair involving a major currency and a currency from an emerging or smaller economy (less liquid, higher spreads).
In your own words: ________________
F
Futures
Derivatives contracts that require buying or selling an asset at a predetermined future date and price, handled on standardized exchanges.
In your own words: ________________
Fundamental Analysis
Evaluating an asset’s value by examining economic indicators, interest rates, news, and other macro data rather than chart patterns.
In your own words: ________________
G
Gap / Gapping
When price jumps between periods, leaving a blank area on the chart (no trading in between). Gaps often occur when markets open after a break or news event.
In your own words: ________________
Good ’Til Cancelled (GTC) Order
An order that remains active until it is either filled or canceled by the trader (does not expire at end of day).
In your own words: ________________
H
Hedging
Opening a trade (or trades) to reduce risk or exposure in an existing position. For example, taking an opposite position to protect against adverse moves.
In your own words: ________________
I
Indicator
A mathematical formula applied to price, volume, or other data to help interpret market direction or strength (e.g. RSI, MACD, moving averages).
In your own words: ________________
Initial Margin
The upfront capital required to open a leveraged position in futures or forex.
In your own words: ________________
Interest Rate Differential
The difference in interest rates between two currencies in a pair; a key factor in carry trades and rollover costs.
In your own words: ________________
L
Leverage
Using borrowed capital to increase the potential size of a trade. It magnifies both profits and losses.
In your own words: ________________
Limit Order
An order to buy or sell at a specified price or better. It will only execute at that price or more favorably.
In your own words: ________________
Liquidity
How easily an asset can be bought or sold without causing a large change in price (i.e., high liquidity = many buyers/sellers).
In your own words: ________________
Lot (Standard / Mini / Micro)
A standard unit size for forex trades (e.g. “1 standard lot = 100,000 units”). Brokers may allow mini (10,000) or micro (1,000) lots.
In your own words: ________________
Long / Go Long
To buy a position with the expectation that its price will rise. You profit when the market goes up.
In your own words: ________________
M
Margin
Money required to hold a leveraged position. It’s like a security deposit to maintain the position.
In your own words: ________________
Maintenance Margin
The minimum equity you must maintain in your account to keep a leveraged position open. If your account drops below this, you may get a margin call.
In your own words: ________________
Market Order
An order to buy or sell immediately at the best available current price.
In your own words: ________________
Moving Average (MA)
A smoothing method that calculates the average price over a certain period. Helps identify trend direction or reversals.
In your own words: ________________
N
Neutral / Flat Position
When a trader has no open positions (neither long nor short).
In your own words: ________________
O
Open Position
A trade that has been entered but not yet closed. It’s still exposed to profit or loss.
In your own words: ________________
Order Types
The various instructions you can send (market, limit, stop, stop-limit).
In your own words: ________________
Over-the-Counter (OTC)
Trading done directly between parties outside of formal exchanges. Many forex trades are OTC.
In your own words: ________________
P
Pip
The smallest standardized change in a currency pair’s price. For most pairs, it’s the fourth decimal place (0.0001). For yen pairs, often the second decimal. Wikipedia+1
In your own words: ________________
Pip Value
The monetary value of one pip movement for a given position size.
In your own words: ________________
Position
The exposure a trader has in a market (long or short) and its size.
In your own words: ________________
Profit / Loss (P&L)
The gain or loss from a trade, realized when the position is closed, or unrealized while it is open.
In your own words: ________________
Q
Quote / Quotation
The price offered in a currency pair (base/quote). It shows how much of the quote currency is needed to obtain one unit of the base currency.
In your own words: ________________
Quote Currency
In a currency pair, the second currency listed (e.g. USD in EUR/USD). It’s the currency used to value the base currency.
In your own words: ________________
R
Range / Sideways Market
When price moves within horizontal support and resistance levels without a clear trend.
In your own words: ________________
Resistance
A price level where selling pressure tends to prevent price from rising further.
In your own words: ________________
Risk Management
Strategies and practices to limit losses (stop loss placement, position size limits, risk/reward ratios).
In your own words: ________________
Risk-to-Reward Ratio (R:R)
A comparison of potential loss (risk) to potential gain (reward). E.g. risking $100 to make $300 is a 1:3 ratio.
In your own words: ________________
Roll / Rollover
The process of carrying forward a forex position to the next day, often involving swap interest. Wikipedia
In your own words: ________________
S
Slippage
When an order is filled at a worse price than expected due to market movement or low liquidity.
In your own words: ________________
Short / Go Short
To sell a position first, expecting the price will fall. You profit if the market moves downward.
In your own words: ________________
Short Squeeze
When heavy short-positioning causes many traders to cover (buy back), pushing the price upward sharply.
In your own words: ________________
Signal
An indication (from price, indicators, patterns) suggesting a possible trade entry or exit.
In your own words: ________________
Spread
The difference between the bid and ask price. It’s effectively the “cost” paid in many markets.
In your own words: ________________
Support
A price level where buying pressure tends to prevent further price decline.
In your own words: ________________
T
Take Profit (TP)
An order to close a trade automatically when a certain profit target is reached.
In your own words: ________________
Technical Analysis
The use of charts, price patterns, and indicators to forecast future price movements.
In your own words: ________________
Timeframe
The period each bar/candle or chart represents (e.g. 1 minute, 1 hour, daily).
In your own words: ________________
Trend
The overall direction of price movement (uptrend, downtrend).
In your own words: ________________
Trendline
A line drawn along successive highs or lows to represent support or resistance in a trend.
In your own words: ________________
V
Volatility
The degree of variation in price over time. High volatility means large price swings; low volatility means smaller moves.
In your own words: ________________
W
Working Order
A general term for an order (limit, stop, etc.) that is placed and active, waiting to be triggered.
In your own words: ________________