Basic terms
Currency pair
The two currencies you trade. In EUR/USD, the price shows how many US dollars (the quote currency, on the right) one euro (the base currency, on the left) is worth. If EUR/USD is 1.0850, one euro equals 1.0850 dollars.
Bid and ask
The bid is the price you sell at, and the ask is the price you buy at. The ask is always a little higher. Most charts show the bid price.
Spread
The difference between the ask and the bid. If you buy and sell right away, you lose this difference, so it is one of your trading costs. It can widen when the market moves fast or when few people are trading.
Pips and points
A unit for measuring price movement. For most pairs, one pip is 0.0001. For pairs with the Japanese yen (such as USD/JPY), one pip is 0.01. If EUR/USD moves from 1.0850 to 1.0870, that is 20 pips. MetaTrader calls the smallest price step a “point”; with brokers that quote 5 decimal places (3 for yen pairs), 10 points = 1 pip. For gold and other products, brokers count differently.
To see how much one pip is worth, use the pip value calculator.
Lot
A unit for trade size. At many brokers that use MetaTrader, 1 lot = 100,000 units of the base currency, but some brokers use 10,000 or 1,000 units as one lot. Always check what one lot means at your broker. To work out a lot size from your stop loss and the amount you are willing to lose, use the position size calculator.
Demo account
An account where you trade with practice money instead of real money. It is useful for learning how to place orders and use the platform. Fills can differ from a real account, and so can how you feel when real money is at risk.
CFD (contract for difference)
A contract where you do not own the underlying asset; you only exchange the difference between the price you opened at and the price you closed at. Depending on the broker, forex as well as stock indices, gold or oil may be traded as CFDs.
Long and short
Going long means opening a trade by buying. Going short means opening a trade by selling. In forex, you can start with either.
Position
A trade you have opened but not closed yet. “Holding a position” means you are in a buy or sell trade.
Execution (fill)
When your order is carried out (filled). “My order was filled at 1.0852” means the trade happened at that price.
Slippage
The difference between the price you asked for and the price you actually got. It can happen when the price moves fast. The new price can be worse or better than you expected.
Order terms
Market order
An order to buy or sell right now, at the current price.
Limit order
An order to buy or sell when the price gets better than now: to buy below the current price, or to sell above it.
Stop order
An order to buy or sell once the price moves to a level you set that is worse than now: to buy above the current price, or to sell below it. It is often used for a stop loss.
Stop loss
An order that closes a trade to limit your loss at a price you set. When the price moves very fast or the market reopens at the start of the trading week, it can be filled at a worse price than you set. The stop loss and take profit calculator turns a distance in pips into the price for your order.
Take profit
An order that closes a trade when it reaches a profit target you set.
Break-even (entry price)
The price where you neither gain nor lose, usually close to your entry price (costs such as spread can make it slightly different). “Moving your stop to break-even” means moving your stop loss to about your entry price.
Hedging
Holding a buy and a sell position on the same pair at the same time. Whether you can do this depends on the broker, the account type and the rules in your country. Spread and swap apply to both positions.
Averaging down
Adding to a losing position in the same direction. Your average entry price improves, but the position gets bigger, so the loss grows faster if the price keeps moving against you.
Trailing stop
A stop loss that moves automatically as the price moves in your favor. It does not move back when the price goes against you. In MetaTrader 4 and 5, a standard trailing stop only works while the terminal is running and connected. If the terminal is closed, the trailing stop stops moving, but the last stop loss it set stays on the server.
Money and account terms
Leverage
Lets you trade a larger amount than the money in your account (your margin). With 10:1 leverage (an example), you need margin of 1/10 of the trade size. Profits and losses both grow with the trade size. The maximum leverage for retail accounts is set by rules that differ by country and region.
Margin (required margin)
Money set aside in your account to keep a position open. It is the trade size divided by the leverage. For example, holding 10,000 euros of EUR/USD at 1.0850 with 10:1 leverage needs 10,000 × 1.0850 ÷ 10 = 1,085 US dollars. Use the margin calculator.
Balance and equity
Your balance includes only closed trades. Your equity is your balance plus the profit or loss of your open positions. When your open loss grows, your equity goes down.
Margin level
Equity ÷ used (required) margin × 100 (%). It goes down as your open loss grows.
Margin call and stop out
When your margin level drops to a set level, your broker may warn you (a margin call) or close your positions automatically (a stop out, also called liquidation). These levels differ by broker and by country’s rules. In a fast market, positions can be closed at a worse price than the stop out level.
Negative balance protection
If losses take your account below zero, the broker covers the negative amount. Some countries and regions require it for retail accounts; some brokers offer it on their own; others do not offer it. Check your broker’s terms.
Swap (rollover)
Money you pay or receive when you hold a position overnight. Brokers set it, mainly based on the interest rate difference between the two currencies. On one day each week, three days of swap are charged (which day depends on the broker). Some brokers offer swap-free accounts, for example for religious reasons. Some of these accounts charge a fee instead of swap, so check the terms. The swap calculator shows the amount for the nights you hold.
Regulator
Each country or region has a public body that licenses and supervises forex brokers. Before using a broker, you can check on the regulator’s official website whether the broker is registered where you live. Rules such as maximum leverage for retail accounts and negative balance protection also differ by regulator.
Account currency
The currency your account money is shown in (US dollars, euros, yen, and so on). The same trade can have a different pip value depending on your account currency.
Results and risk terms
Open and closed profit/loss
Open (floating) profit or loss is for positions you have not closed yet. Closed (realized) profit or loss is for trades you have closed. The profit and loss calculator works it out from your entry and exit prices.
Risk per trade
The amount you decide you are willing to lose on one trade. Some traders set it as a percentage of their account, others as a fixed amount. The position size calculator turns this amount and your stop distance into a lot size.
Win rate
Winning trades ÷ all trades. Win rate alone does not tell you whether you are making money.
Reward-to-risk ratio
The size of your target compared with the size of your stop. With a 20-pip stop and a 40-pip target, reward : risk = 2 : 1.
Break-even win rate
The win rate at which you neither make nor lose money, given your reward-to-risk ratio. At 2 : 1, it is about 33.3% (before costs). Use the break-even win rate calculator.
Drawdown
How far your account has fallen from its highest point. After a 20% drawdown, you need a 25% gain to get back. Check it with the drawdown recovery calculator.
Losing streak
Several losses in a row. Even with a 50% win rate, the chance of at least one streak of 5 or more losses in 100 trades is about 80% (a calculation example, assuming each trade is independent). See the losing streak calculator and Losing streaks, seen through probability.
Daily loss limit
An amount you set for yourself: if you lose this much in a day, you stop for that day. Work it out with the daily loss limit calculator, and, if you enter each loss amount, see how much room is left today with the daily trading tracker.
Market terms
Volatility
How much the price moves. When volatility is high, the price can move a lot in a short time.
Trading sessions
Forex trades almost 24 hours a day, from about 5 a.m. Monday in Sydney to 5 p.m. Friday in New York (your broker's hours may differ). The most active regions change through the day. Common names are Sydney, Tokyo, London and New York. The forex market hours tool shows them in your local time.
Economic data releases
Official numbers about an economy, such as jobs or prices. Around these releases, the price can move more and spreads can widen.
Gap
When the price jumps, leaving an empty space on the chart between one price and the next. It often happens when the market reopens at the start of the trading week, and a stop loss can be filled at a worse price than set.
Liquidity
How easy it is to trade, and how much trading is going on. When liquidity is low, spreads can widen and slippage is more likely.
Chart terms
Candlestick
One bar that shows the open, high, low and close for a set period. Its color shows whether the close was above or below the open (you can change the colors in your settings).
Timeframe
The length of time one candlestick covers, such as 1 minute, 15 minutes, 1 hour or 1 day.
Support and resistance
Price levels drawn on a chart where the price stopped falling (support) or stopped rising (resistance) in the past. The price does not always stop there again.
Scalping, day trading and swing trading
Names for how long you hold a position. Scalping usually means closing within seconds or minutes, day trading means closing within the same day, and swing trading means holding for days or weeks. None of them is better in itself.
Trend
When the price keeps moving in one direction: an uptrend or a downtrend.
Pivot points
Price levels calculated from a previous period’s high, low and close (often the previous day). Use the pivot point calculator.
Fibonacci retracement
Levels that divide the range between a high and a low by ratios such as 38.2%, 50% and 61.8%. Use the Fibonacci calculator.
Indicator
A value calculated from prices (and sometimes volume) and shown on the chart, such as moving averages, RSI, MACD or Bollinger Bands. All of them are calculated from past prices; they do not decide where the price goes next.
Mindset and habit terms
Tilt
When losses or frustration upset you and you make decisions you normally would not. The word comes from poker.
Revenge trading
Trying to win back a loss quickly, by entering setups you had not planned or by trading bigger. See How to stop revenge trading.
Overtrading
Taking more trades than your own plan or conditions allow. See How to notice overtrading.
Trading journal
A record of each trade that includes not only the result, but also how you felt and whether you kept your rules. See What to write in a trading journal.