Trading Glossary
50+ essential trading terms explained clearly. Click any term to view detailed explanations and trading examples.
A
Ask PriceView details →
The price at which a broker will sell a currency pair. Also known as the offer price. It is always higher than the bid price.
A-BookView details →
An execution model where the broker routes client trades directly to a liquidity provider (LP). The broker earns revenue solely from commissions and markups, not from client losses.
ArbitrageView details →
The simultaneous buying and selling of an asset in different markets to exploit tiny differences in price.
B
Base CurrencyView details →
The first currency in a currency pair. In EUR/USD, the euro is the base currency. It represents how much of the quote currency is needed to buy one unit of the base.
Bid PriceView details →
The price at which a broker will buy a currency pair from you. The difference between bid and ask is the spread.
BrokerView details →
A financial intermediary that executes buy and sell orders on behalf of traders. Forex brokers provide access to the interbank market and charge fees through spreads or commissions.
B-BookView details →
An execution model where the broker takes the opposite side of a client's trade. If the client wins, the broker loses money. If the client loses, the broker profits.
Break EvenView details →
The point at which a trade has zero profit and zero loss (excluding spreads and commissions).
C
CFDView details →
Contract for Difference. A derivative product allowing you to speculate on price movements without owning the underlying asset. Profits and losses are determined by the difference between entry and exit prices.
CommissionView details →
A fee charged by brokers per trade, usually expressed per lot (e.g., $3.50 per lot). ECN and Raw-spread accounts typically charge commissions alongside tighter spreads.
Copy TradingView details →
A feature allowing traders to automatically replicate the trades of experienced traders. Popular platforms include eToro, ZuluTrade, and AvaSocial.
Cross PairView details →
A currency pair that does not include the US dollar. Examples include EUR/GBP, AUD/JPY, and GBP/CHF.
cTraderView details →
A popular electronic trading platform known for its intuitive interface, advanced charting, and Level II pricing. Favored by ECN traders.
D
Day TradingView details →
A trading strategy where all positions are opened and closed within the same trading day, avoiding overnight exposure to market risk.
Demo AccountView details →
A risk-free practice account provided by brokers using virtual money. It simulates live market conditions and is ideal for beginners to practice strategies.
DrawdownView details →
The peak-to-trough decline in account equity, usually expressed as a percentage. Used to measure risk and evaluate trading strategy performance.
DrawdownView details →
The peak-to-trough decline during a specific record period of an investment, usually quoted as a percentage.
E
ECN BrokerView details →
Electronic Communication Network broker. Routes orders directly to liquidity providers, offering tighter spreads and transparent pricing in exchange for a commission per trade.
Execution SpeedView details →
The time it takes for a broker to fill a trade order, measured in milliseconds. Faster execution reduces slippage risk, especially important for scalpers.
Expert Advisor (EA)View details →
An automated trading program that runs on MetaTrader platforms (MT4/MT5). It follows pre-programmed rules to open, manage, and close trades without human intervention.
ECNView details →
Electronic Communication Network. A system that automatically matches buy and sell orders for securities in the market without a middleman.
Expert Advisor (EA)View details →
Automated trading software written in MQL4 or MQL5 that runs on MetaTrader terminals to execute trades algorithmically.
H
High-Water MarkView details →
The highest peak in value that an investment account has ever reached.
HedgingView details →
Opening a position specifically designed to offset the risk of another active position.
High-Frequency Trading (HFT)View details →
Algorithmic trading characterized by high speeds, high turnover rates, and high order-to-trade ratios.
L
LeverageView details →
A mechanism allowing traders to control a large position with a relatively small amount of capital. 1:100 leverage means $1,000 can control $100,000 worth of trades.
Liquidity SweepView details →
A sudden price spike designed to trigger retail stop losses resting above or below obvious support and resistance levels.
Limit OrderView details →
A pending order to buy below the current market price or sell above the current market price.
M
Margin CallView details →
A notification from your broker that your account equity has dropped below the required maintenance margin. You must either deposit additional funds or close positions.
Margin CallView details →
A warning from a broker that your account margin has fallen below the required minimum level to keep positions open.
Market OrderView details →
An instruction to execute a trade immediately at the best available current market price.
P
R
S
SlippageView details →
The difference between the expected price of a trade and the actual execution price. Most common during high volatility or low liquidity periods.
SpreadView details →
The difference between the bid and ask price. This is the primary cost of trading with most brokers. Measured in pips (e.g., 0.8 pips on EUR/USD).
SlippageView details →
The difference between the expected price of a trade and the actual price at which the trade is executed.
Stop OutView details →
The automatic closure of a trader's open positions by the broker when the margin level falls to a critically low threshold.
Smart Money Concepts (SMC)View details →
A trading methodology that attempts to track the algorithmic footprints of institutional traders (banks, hedge funds) using price action.
STPView details →
Straight Through Processing. A broker model where client orders are passed directly to liquidity providers with zero manual intervention.
Swap RateView details →
The interest rate differential between the two currencies of a pair, credited or debited to your account during rollover.
Stop Loss (SL)View details →
A pending risk-management order that automatically closes a losing position once it reaches a specified price.
Stop OrderView details →
A pending order to buy above the current market price or sell below the current market price.
T
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