Forex Trading Glossary: 40+ Terms Every Trader Should Know

Forex has its own vocabulary. This glossary explains the terms you will see most often on trading platforms, in broker documents and in our guides, in plain English.

A–C

Ask: the price at which you can buy. Always slightly higher than the bid.

ATR (Average True Range): an indicator that measures volatility, often used to set stop-losses.

Base currency: the first currency in a pair. In EUR/USD, the euro.

Bid: the price at which you can sell.

Broker: the company that gives you access to the market and holds your trading account. See how to choose a broker.

Commission: a separate fee per trade or per lot, common on ECN accounts.

Counter (quote) currency: the second currency in a pair. In EUR/USD, the US dollar.

Crypto pair: a pair that prices a cryptocurrency against a currency, such as BTC/USD.

D–L

Demo account: a practice account with virtual funds on the same platform.

Drawdown: the fall in account value from a peak.

ECN (Electronic Communication Network): an execution model that matches your orders with quotes from many liquidity providers. Read what is an ECN broker?

Equity: your balance plus or minus the profit or loss on open positions.

Free margin: equity minus used margin; what is available for new trades.

Leverage: borrowed buying power that lets you control a larger position than your deposit. See how leverage works.

Limit order: an order to enter at a better price than the current one.

Liquidity: how easily an instrument can be bought or sold without moving the price.

Long: a buy position that profits if the price rises.

Lot: a standard unit of trade size. A standard lot is 100,000 units, a mini lot 10,000 and a micro lot 1,000.

M–R

Margin: the amount set aside from your account to open a leveraged position.

Margin call: a warning that your margin level is getting too low.

Margin level: equity divided by used margin, shown as a percentage.

Market maker: a broker that sets its own prices and often takes the other side of client trades.

Market order: an order to buy or sell immediately at the current price.

Pip: the standard unit of price movement, usually the fourth decimal place (0.0001), or the second for yen pairs.

Pipette: one tenth of a pip.

Position size: how large a trade is, in lots or units.

Requote: when a broker offers a new price instead of filling your order at the requested one.

Risk-reward ratio: potential loss compared with potential gain on a trade.

S–Z

Short: a sell position that profits if the price falls.

Slippage: the difference between the expected price and the filled price.

Spread: the difference between bid and ask; the built-in cost of every trade. See spreads explained.

Stablecoin: a cryptocurrency designed to hold a steady value, such as USDT. See trading forex with USDT.

Stop-loss: an order that closes a trade at a set price to limit losses.

Stop order: an order to enter once price moves through a set level.

Stop-out: automatic closing of positions when margin level falls too low.

STP (Straight Through Processing): a model that passes orders directly to liquidity providers. See ECN vs STP.

Swap: the overnight financing charge or credit for holding a position past the daily rollover.

Take-profit: an order that closes a trade at a set price to lock in gains.

TradeLocker: a modern trading platform with TradingView charts built in. Read what is TradeLocker?

TradingView: the charting technology integrated into TradeLocker.

Volatility: how much and how quickly prices move.

Put it into practice. Open a free demo on TradeLocker, or open a Clarity FX account with no minimum deposit.

Trading forex and crypto on leverage carries a high risk of loss and may not be suitable for all investors. This article is educational and not financial advice. Read our risk disclosure.