Forex Glossary

A–C

• Ask — the price at which you can buy.
• Base currency — the first currency in a pair (GBP in GBP/USD); also the currency your account is held in.
• Bear / bearish — expecting prices to fall.
• Bid — the price at which you can sell.
• Bull / bullish — expecting prices to rise.
• Carry trade — earning the interest-rate difference between two currencies.
• CFD — contract for difference; a derivative that tracks a price without owning the asset.
• Cross pair — a pair without the US dollar, such as EUR/GBP.

D–L

• Drawdown — the fall from an account's peak to its lowest point.
• ECN — electronic communication network; an execution model with raw spreads and commission.
• Equity — balance plus or minus open profit and loss.
• Expert Advisor (EA) — an automated trading program on MetaTrader.
• Free margin — equity not tied up as margin.
• Gap — a jump in price between one quote and the next, often at the weekly open.
• GSLO — guaranteed stop-loss order; closes at exactly your level for a fee.
• Hedging — opening a position to offset risk on another.
• Leverage — controlling a larger position than your margin; capped at 30:1 on majors for UK retail.
• Limit order — an order to buy below or sell above the current price.
• Liquidity — how easily a market can be traded without moving the price.
• Long — a buy position.
• Lot — standard trade size: 100,000 units (mini 10,000; micro 1,000).

M–R

• Margin — the deposit required to open and keep a leveraged position.
• Margin call — warning that equity is close to required margin.
• Margin close-out — automatic closing of positions; at 50% for UK retail CFD clients.
• Market order — an order executed immediately at the best available price.
• Negative balance protection — retail clients can't lose more than their account balance.
• Pip — standard unit of price movement (0.0001; 0.01 for JPY pairs).
• Pipette — a tenth of a pip.
• Quote currency — the second currency in a pair.
• Requote — a broker offering a new price because the requested one is no longer available.
• Risk-reward ratio — potential loss compared with potential gain.
• Rollover — the daily point (around 22:00 UK) when positions are rolled and financing applied.

S–Z

• Scalping — very short-term trading for small gains.
• Short — a sell position.
• Slippage — the difference between expected and actual fill price.
• Spread — the difference between bid and ask; the main trading cost.
• Spread bet — a UK product where you stake an amount per point of movement.
• Stop-loss — an order that closes a losing position at a set level.
• Swap — overnight financing charge or credit.
• Take-profit — an order that closes a winning position at a target.
• Trailing stop — a stop that follows price by a set distance.
• Volatility — how much and how quickly prices move.

CFDs and spread bets are complex instruments and come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading these products. You should consider whether you understand how they work and whether you can afford to take the high risk of losing your money. Content is general information, not financial or tax advice.