Glossary

Trading words, in plain English

Every term a beginner runs into in the first month, explained without using three more terms you also do not know.

A

Ask: The price you pay if you buy right now. Always slightly above the bid — the gap between them is the spread.
Asset: Anything you can trade: a currency pair, a share, an index, a commodity, a cryptocurrency.

B

Backtesting: Testing a set of rules against historical prices to see how it would have performed. Useful, but easy to fool yourself with — real markets do not repeat, and a rule tuned to the past usually stops working in the present.
Bear market: A market in a sustained decline. A trader who expects prices to fall is called bearish.
Bid: The price you receive if you sell right now. Always slightly below the ask.
Break-even win rate: The percentage of trades you must win just to end up level, given your payout or your risk-to-reward ratio. With fixed-payout products it is well above 50%, which is the single most overlooked number in trading.
Broker: The company that gives you access to a market and executes your orders. It is not a neutral party — it earns from spreads, commissions or from taking the other side of your trade, so read what it is you are actually signing.
Bull market: A market in a sustained rise. A trader expecting prices to rise is bullish.

C

Candlestick: The standard way of drawing price on a chart. Each candle shows the open, close, high and low for one slice of time.
CFD: Contract for difference. An agreement to exchange the change in an asset's price without ever owning the asset. Usually leveraged, and usually carries an overnight financing charge.
Commission: A direct fee per trade, charged instead of, or in addition to, a wider spread.
Copy trading: Automatically mirroring another trader's positions. It moves the decision to a stranger whose risk rules and incentives you cannot see; it does not remove the risk.

D

Demo account: A practice account funded with virtual money. Free on almost every platform, and the most under-used tool available to a beginner.
Digital option: A fixed-payout product: pick a direction and an expiry time, receive a set percentage if you are right, lose the whole stake if you are not. Also called a binary or fixed-return option, and restricted for retail clients in several jurisdictions.
Drawdown: The fall from an account's peak balance to its lowest point afterwards, in percent. The number professionals watch most closely, because deep drawdowns are mathematically brutal to recover from.

E

Equity: Your account balance including the running profit or loss of open positions. It moves every second while a trade is open; the balance does not.
Execution: The act of your order being filled. Fast, reliable execution matters more than a slightly better advertised spread.
Expiry: The moment a fixed-term contract — most often a digital option — settles. Being right about direction but wrong about the expiry is still a full loss.

F

Fill: The price at which your order actually executed, which is not always the price you saw when you clicked.
FOMO: Fear of missing out. The urge to jump into a move that already happened. FOMO entries are consistently the worst entries a retail trader makes.
Forex: The foreign exchange market, where one currency is traded against another. The largest and most liquid market in the world, open 24 hours on weekdays.
Fundamental analysis: Judging an asset by underlying facts — earnings, interest rates, economic data — rather than by chart patterns.

G

Gap: A jump in price with no trading in between, most often between a Friday close and a Monday open. Gaps can skip straight past a stop loss.
Going long: Buying, in the expectation that price will rise.
Going short: Selling something you do not own, in the expectation that price will fall, planning to buy it back cheaper.

H

Hedging: Opening a position that offsets the risk of another one. Useful for institutions; usually an expensive way for beginners to avoid admitting a loss.

I

Indicator: A calculation performed on price data and drawn on the chart — a moving average, RSI, MACD. Indicators summarise what already happened; none of them predicts.

K

KYC: Know Your Customer. The identity verification a regulated platform must complete, usually before your first withdrawal. Find out when it is required — discovering it while trying to withdraw is a bad surprise.

L

Leverage: Borrowed exposure that lets a small deposit control a large position. It multiplies profit and loss by exactly the same factor. Written as 1:100 or similar.
Limit order: An instruction to trade only at a specified price or better. Certain on price, uncertain on whether it executes at all.
Liquidity: How easily an asset can be traded without moving its price. High liquidity means tight spreads and clean fills; low liquidity means the opposite, especially at night and around holidays.
Long: See going long.
Lot: A standard unit of position size in forex. One standard lot is 100,000 units of the base currency; a micro lot is 1,000.

M

Margin: The portion of your balance the platform freezes as collateral while a leveraged position is open.
Margin call: A demand to add funds because your free margin has fallen too low. Ignore it and the platform closes your positions itself.
Market order: An instruction to trade immediately at whatever price is available. Certain to execute, uncertain on price.
Moving average: The average price over the last N periods, drawn as a line. Smooths out noise so that direction is easier to see. It confirms; it does not forecast.

O

Overtrading: Taking far more trades than your method calls for, usually out of boredom or to recover a loss. Each extra trade costs the spread and consumes a decision.

P

Payout: With fixed-return products, the percentage of your stake returned as profit on a winning trade. A 90% payout on a $10 trade returns $19 in total; a loss costs the full $10.
Pip: The smallest standard price increment in forex, usually the fourth decimal place. On EUR/USD, a move from 1.0850 to 1.0851 is one pip.
Position size: How much you trade on a single position. Calculated from your account, your risk percentage and your stop distance — never chosen by feel.

R

Range: A market moving sideways between a floor and a ceiling, with no clear trend. Most markets are in a range most of the time.
Requote: The platform declining your order at the requested price and offering a different one, usually in a fast market.
Resistance: A price zone above the current price where selling has repeatedly appeared and stopped a rise. A zone, not a line, and it fails regularly.
Revenge trading: Opening a bigger position immediately after a loss to win it back. The single most reliable way to turn a bad day into a wiped account.
Risk-to-reward ratio: How much you stand to gain compared with what you are risking. Risking $10 to make $20 is 1:2. A good ratio lets you be profitable while winning under half your trades.

S

Scalping: Very short-term trading, seconds to minutes, for tiny moves. Extremely sensitive to costs and to execution quality, and a poor fit for beginners.
Short: See going short.
Slippage: The difference between the price you expected and the price you got. Grows in fast markets and around news, and it is one reason a stop loss is not a guarantee.
Spread: The gap between the bid and the ask, and the most common way a platform earns from you. You pay it on every round trip, whether the trade wins or loses.
Stop loss: An order that closes a position automatically once it has lost a set amount. Set it before you enter, and never widen it to avoid taking a loss.
Stop-out: The platform force-closing your positions because margin has run out. It happens at market price, at the worst possible moment, and it is not negotiable.
Support: A price zone below the current price where buying has repeatedly appeared and stopped a fall.
Swap: The financing charge for holding a leveraged position overnight. Small each night, significant over weeks, and invisible unless you look for it.

T

Take profit: An order that closes a position automatically once a target gain is reached. Set it before you enter, alongside the stop loss.
Technical analysis: Judging an asset by its price history and chart behaviour rather than by underlying facts.
Tilt: Borrowed from poker: the state of trading to change how you feel rather than to execute a plan. Recognisable from the inside by rising size and shrinking gaps between trades.
Timeframe: How much time one candle covers — M1, M5, H1, D1. Changing it changes what you see, not what happened.
Trend: A sustained direction: higher highs and higher lows, or lower highs and lower lows. Anything else is a range.

V

Volatility: How much and how fast price moves. High volatility means bigger candles, bigger wins, bigger losses and faster stop hits.
Volume: How much was traded in a period. Rising volume behind a move suggests genuine participation; a move on thin volume is easier to reverse.

W

Win rate: The share of your trades that finish profitable. Meaningless on its own — a 30% win rate with a 1:4 risk-to-reward beats a 70% win rate with a 1:0.3.