Forex Glossary
An A–Z of the forex terms used in this course and in the trading world, each with a short, plain-English definition. Use the letter links to jump, or press Ctrl + F to search the page.
A
| Term | Definition |
|---|
| ADX (Average Directional Index) | An indicator that measures trend strength from 0 to 100. Above 25 usually means a strong trend. |
| Algorithmic trading | Using a computer program to follow trading rules and place orders. See Algorithmic Trading. |
| Appreciation | A rise in a currency's value against another currency. |
| Arbitrage | Profiting from small price differences for the same asset in different places at the same time. |
| Ask | The price at which you can buy. Also called the offer. Always higher than the bid. |
| ATR (Average True Range) | An indicator showing the average size of recent candles. Used to set stops. See ATR. |
| Aussie | Trader slang for the Australian dollar (AUD) or AUD/USD. |
| Averaging down | Adding to a losing position to lower the average entry price. Very risky. |
B
| Term | Definition |
|---|
| Backtesting | Testing a strategy on historical data to see how it would have performed. See Backtesting. |
| Balance | Account money from closed trades only. Does not include open profit or loss. |
| Base currency | The first currency in a pair. In EUR/USD, EUR is the base. |
| Basis point | One hundredth of one percent (0.01%). Used for interest rates: 25 bp = 0.25%. |
| Bear / bearish | Expecting or seeing falling prices. A bear market is a falling market. |
| Bid | The price at which you can sell. Always lower than the ask. |
| Bollinger Bands | A moving average with bands two standard deviations above and below. See Bollinger Bands. |
| Break-even | The price where a trade has no profit or loss. Moving a stop to break-even removes the risk. |
| Breakout | When price moves through a support, resistance or pattern boundary with momentum. |
| Broker | A company that gives you access to the market and executes your orders. See Choosing a Broker. |
| Bull / bullish | Expecting or seeing rising prices. A bull market is a rising market. |
| Buy limit | A pending order to buy below the current price. |
| Buy stop | A pending order to buy above the current price, often used for breakouts. |
C
| Term | Definition |
|---|
| Cable | Trader slang for GBP/USD, from the old transatlantic telegraph cable. |
| Candlestick | A chart bar showing open, high, low and close for one period. See Candlesticks. |
| Carry trade | Buying a high-interest currency against a low-interest one to earn the rate difference. See Carry Trade. |
| Central bank | The institution that sets a country's interest rates and monetary policy, e.g. the Fed, ECB, BoE, BoJ. |
| CFD (Contract for Difference) | A contract that pays the difference in price between open and close, without owning the asset. Not available to US retail traders. |
| Chart pattern | A recognisable price shape, such as a double top or triangle. See Chart Patterns. |
| Commission | A fee charged per trade, common on ECN/raw-spread accounts. |
| Consolidation | A period when price moves sideways in a range. |
| Correlation | How closely two pairs move together, from −1 to +1. See Correlations. |
| COT report | The CFTC's weekly Commitments of Traders report showing futures positioning. See Sentiment & COT. |
| Counter currency | Another name for the quote currency (second currency in a pair). |
| CPI (Consumer Price Index) | The main measure of inflation. A key market-moving release. |
| Cross pair | A pair that does not include the US dollar, e.g. EUR/GBP or GBP/JPY. |
D
| Term | Definition |
|---|
| Day trading | Opening and closing trades within the same day. |
| Dealing desk | A broker model where the broker takes the other side of client trades (market maker). |
| Demo account | A practice account using virtual money and live prices. |
| Depreciation | A fall in a currency's value against another currency. |
| Divergence | When price and an indicator move in opposite directions, warning of weakening momentum. See Divergence. |
| Doji | A candle where open and close are almost equal, showing indecision. |
| Dovish | A central bank stance favouring lower rates or looser policy. Usually weakens the currency. |
| Drawdown | The fall in account value from a peak to a low, usually in percent. |
| DXY (US Dollar Index) | An index of the US dollar against six major currencies, mostly the euro. |
E
| Term | Definition |
|---|
| EA (Expert Advisor) | An automated trading program for MetaTrader. |
| ECN (Electronic Communication Network) | A broker model that routes orders to a network of liquidity providers. Raw spreads plus commission. |
| Economic calendar | A schedule of upcoming economic releases and central bank events. |
| Elliott Wave | A theory that markets move in five-wave trends and three-wave corrections. See Elliott Wave. |
| EMA (Exponential Moving Average) | A moving average that gives more weight to recent prices. |
| Engulfing pattern | A two-candle reversal where the second body completely covers the first. |
| Equity | Balance plus or minus the profit or loss of open trades. |
| Exotic pair | A major currency against an emerging-market currency, e.g. USD/TRY. Wider spreads. |
| Expectancy | The average amount you expect to win or lose per trade over many trades. See Risk:Reward. |
F
| Term | Definition |
|---|
| FCA | The Financial Conduct Authority, the UK's financial regulator. |
| Fiber | Trader slang for EUR/USD. |
| Fibonacci retracement | Levels (23.6%, 38.2%, 50%, 61.8%, 78.6%) where pullbacks often pause. See Fibonacci. |
| Fill | The execution of an order at a price. |
| Fixed spread | A spread that stays the same in most conditions. Usually wider on average than floating. |
| Floating spread | A spread that changes with market liquidity. Also called variable spread. |
| FOMC | The Federal Open Market Committee, the Fed group that sets US interest rates. |
| Free margin | Equity minus used margin. Money available to open new trades. |
| Fundamental analysis | Studying economic data, rates and news to judge currency value. See Fundamental Analysis. |
| Futures | Exchange-traded contracts to buy or sell at a set price on a future date, e.g. CME currency futures. |
G
| Term | Definition |
|---|
| Gap | A jump in price with no trading in between, common at the weekly open. |
| GDP (Gross Domestic Product) | The total value of goods and services a country produces. A measure of economic growth. |
| Greenback | Slang for the US dollar. |
| Guaranteed stop loss | A stop that is filled at your exact price even in gaps, usually for an extra fee. |
H
| Term | Definition |
|---|
| Hammer | A bullish one-candle pattern with a small body on top and a long lower wick. |
| Harmonic pattern | A price pattern built on Fibonacci ratios, such as the Gartley or Bat. See Harmonics. |
| Hawkish | A central bank stance favouring higher rates or tighter policy. Usually strengthens the currency. |
| Head and shoulders | A reversal pattern with three peaks, the middle one highest. |
| Hedging | Opening a position to offset the risk of another. |
| Higher high / higher low | The building blocks of an uptrend. See Market Structure. |
I
| Term | Definition |
|---|
| Indicator | A calculation based on price or volume, plotted on a chart, e.g. RSI or MACD. |
| Inflation | The rate at which prices rise. Higher inflation often leads to higher interest rates. |
| Interbank market | The wholesale market where large banks trade currencies with each other. |
| Interest rate differential | The difference between two countries' interest rates. Drives carry trades and swaps. |
| Intervention | When a central bank or government buys or sells its currency to move its value. |
J
| Term | Definition |
|---|
| Jobs report | See NFP. Monthly US employment data, one of the biggest market movers. |
| JPY pair | A pair with the Japanese yen as quote currency. One pip is 0.01. |
K
| Term | Definition |
|---|
| Key level | An important price where buyers or sellers have acted before, such as a major support or round number. |
| Kiwi | Slang for the New Zealand dollar (NZD) or NZD/USD. |
L
| Term | Definition |
|---|
| Lagging indicator | An indicator that confirms a move after it starts, e.g. moving averages. |
| Leading indicator | An indicator that tries to signal a move before it happens, e.g. oscillators. |
| Leverage | Using borrowed funds to control a larger position. 1:30 means $1 controls $30. See Leverage & Margin. |
| Limit order | A pending order to buy below or sell above the current price. |
| Liquidity | How easily you can trade without moving the price. EUR/USD is the most liquid pair. |
| Liquidity sweep | A quick move beyond an obvious high or low to trigger stops before reversing. See Liquidity. |
| Long | A buy position that profits when price rises. |
| Loonie | Slang for the Canadian dollar (CAD). |
| Lot | A standard trade size. A standard lot is 100,000 units of the base currency. See Lot Sizes. |
M
| Term | Definition |
|---|
| MACD | Moving Average Convergence Divergence, a momentum indicator (12, 26, 9). See MACD. |
| Major pair | One of the most traded pairs, all including USD, e.g. EUR/USD, USD/JPY, GBP/USD. |
| Margin | The deposit needed to open and hold a leveraged position. |
| Margin call | A warning when equity falls too low relative to used margin. |
| Market maker | A broker or bank that quotes both bid and ask and takes the other side of trades. |
| Market order | An order to buy or sell immediately at the best available price. |
| Market structure | The pattern of highs and lows that defines a trend or range. |
| Micro lot | 1,000 units (0.01 lots). $0.10 per pip on xxx/USD pairs. |
| Mini lot | 10,000 units (0.10 lots). $1 per pip on xxx/USD pairs. |
| Moving average | The average price over a set number of candles, plotted as a line. See Moving Averages. |
N
| Term | Definition |
|---|
| NDD (No Dealing Desk) | A broker model that passes orders to liquidity providers instead of trading against clients. |
| Net position | Your total long minus short exposure in a currency. |
| News trading | Trading around economic releases. See Trading the News. |
| NFP (Non-Farm Payrolls) | The US jobs report released on the first Friday of most months. |
O
| Term | Definition |
|---|
| OCO (One Cancels the Other) | Two linked orders; when one fills, the other is cancelled. |
| Offer | Another word for the ask price. |
| Open position | A trade that has not yet been closed. |
| Order block | In smart-money trading, the last opposite candle before a strong move, seen as an institutional zone. |
| Overbought | When price has risen fast and may be due for a pullback, e.g. RSI above 70. |
| Oversold | When price has fallen fast and may be due for a bounce, e.g. RSI below 30. |
P
| Term | Definition |
|---|
| Pip | The standard unit of price movement: 0.0001 for most pairs, 0.01 for JPY pairs. See Pips. |
| Pip value | The money value of a one-pip move for a given trade size. |
| Pipette | One tenth of a pip (the fifth decimal, or third for JPY pairs). |
| Pivot points | Support and resistance levels calculated from the previous period's high, low and close. |
| PMI (Purchasing Managers' Index) | A survey of business activity. Above 50 means expansion. |
| Position sizing | Choosing trade size so a stop-out loses a fixed amount. See Position Sizing. |
| Price action | Trading from the raw movement of price and candles, with few or no indicators. See Price Action. |
| Prop firm | A proprietary trading firm that funds traders in exchange for a profit split. See Prop Firms. |
| Pullback | A temporary move against the trend before it continues. |
Q
| Term | Definition |
|---|
| Quantitative easing (QE) | A central bank buying bonds to add money to the economy. Usually weakens the currency. |
| Quantitative tightening (QT) | A central bank shrinking its balance sheet, the opposite of QE. |
| Quote | The current bid and ask price of a pair. See Reading Quotes. |
| Quote currency | The second currency in a pair. In EUR/USD, USD is the quote currency. |
R
| Term | Definition |
|---|
| R-multiple | Profit or loss measured in units of initial risk (R). A 2R win made twice the risk. |
| Range | A market moving sideways between support and resistance. |
| Requote | When a broker cannot fill at your price and offers a new one. |
| Resistance | A price level where selling pressure tends to stop rises. See Support & Resistance. |
| Retail trader | An individual trading with their own money, not for an institution. |
| Risk:reward ratio | Potential loss compared with potential gain. 1:2 risks $1 to make $2. |
| Rollover | Moving an open position to the next value date overnight, which triggers a swap. |
| RSI (Relative Strength Index) | A momentum oscillator from 0 to 100, default 14. See RSI. |
S
| Term | Definition |
|---|
| Scalping | Very short-term trading aiming for a few pips per trade. |
| Sell limit | A pending order to sell above the current price. |
| Sell stop | A pending order to sell below the current price. |
| Sentiment | The overall mood of the market, bullish or bearish. |
| Short | A sell position that profits when price falls. |
| Slippage | The difference between your requested price and the fill price. |
| Spread | The difference between bid and ask. Your main trading cost. |
| Standard lot | 100,000 units (1.00 lot). $10 per pip on xxx/USD pairs. |
| Stochastic | A momentum oscillator comparing close to the recent range (14, 3, 3). See Stochastic. |
| Stop loss | An order that closes a trade at a set loss. See Stop Loss. |
| Stop out | When the broker automatically closes trades because margin level fell too low. |
| Support | A price level where buying pressure tends to stop falls. |
| Swap | Overnight interest paid or earned for holding a position past the daily rollover. |
| Swing trading | Holding trades for days to weeks to catch larger moves. |
T
| Term | Definition |
|---|
| Take profit | An order that closes a trade at a set profit target. |
| Technical analysis | Studying price charts and indicators to forecast moves. |
| Tick | The smallest price change, or a single price update. |
| Timeframe | The period each candle covers, e.g. M15, H1, H4, D1. See Multi-Timeframe. |
| Trailing stop | A stop that follows price by a set distance as the trade moves in your favour. |
| Trend | The general direction of price: up, down or sideways. See Trends. |
| Trendline | A line connecting swing lows (uptrend) or swing highs (downtrend). |
U
| Term | Definition |
|---|
| Underlying | The asset a derivative is based on, e.g. EUR/USD for a EUR/USD CFD. |
| Unrealised P/L | Profit or loss on open trades. Becomes realised when the trade closes. |
| Uptrend | A series of higher highs and higher lows. |
V
| Term | Definition |
|---|
| Value date | The date a currency trade settles. Spot settles two business days later (T+2) in most pairs. |
| Volatility | How much and how fast price moves. Measured with ATR or standard deviation. |
| Volume | The amount traded. Spot forex has no central volume, so platforms show tick volume. |
| VPS (Virtual Private Server) | A remote computer that runs your platform or bot 24 hours a day. |
W
| Term | Definition |
|---|
| Weekend gap | A gap between Friday's close and Sunday's open caused by weekend news. |
| Whipsaw | A fast move one way then back the other, triggering false signals and stops. |
| Wick | The thin line above or below a candle body showing the high or low. Also called a shadow. |
| Win rate | The percentage of trades that are winners. |
X
| Term | Definition |
|---|
| XAG/USD | Silver priced in US dollars. |
| XAU/USD | Gold priced in US dollars, often traded on forex platforms. |
Y
| Term | Definition |
|---|
| Yard | Trader slang for one billion units of currency. |
| Yield | The return on a bond. Rising bond yields often support a currency. |
Z
| Term | Definition |
|---|
| Zero-sum game | In forex, one side's gain is roughly the other side's loss (before costs). |
| Zone | A price area rather than an exact line, e.g. a supply or demand zone. See Supply & Demand. |
Tip: Can't find a term? Try the search box at the top of the page, or check the Cheat Sheet for formulas and settings.
Test Yourself With Exercises
What is "Cable"?
- EUR/USD
- GBP/USD
- USD/CAD
Cable is slang for GBP/USD, named after the telegraph cable that once carried the rate across the Atlantic.
What does "hawkish" mean?
- Favouring lower interest rates
- A pattern with three peaks
- Favouring higher interest rates or tighter policy
A hawkish central bank leans towards raising rates, which usually supports the currency. The opposite is dovish.
Your balance is $10,000 and your open trades are down $400. What is your equity?
- $9,600
- $10,000
- $10,400
- $400
Equity = balance ± open P/L = $10,000 − $400 = $9,600.
How many units are in a micro lot?
- 100,000
- 10,000
- 100
- 1,000
A micro lot is 1,000 units (0.01 lots), worth about $0.10 per pip on xxx/USD pairs.