Use this glossary alongside our beginner learning path. Definitions describe common usage; a provider’s contract and platform specifications determine how a particular account works.
Currency quotes and position size
- Base currency
- The first currency in a pair. In EUR/USD, it is EUR.
- Quote currency
- The second currency, used to express the price of the base currency. In EUR/USD, it is USD.
- Bid
- The displayed price at which you can sell, subject to execution conditions.
- Ask
- The displayed price at which you can buy, subject to execution conditions.
- Spread
- The difference between bid and ask. It is one component of trading cost.
- Pip
- A conventional exchange-rate increment: commonly 0.0001 for many pairs and 0.01 for many yen pairs. Check the specification.
- Fractional pip
- A smaller displayed increment than a conventional pip, sometimes called a pipette.
- Lot
- A conventional quantity of base currency. A standard forex lot is commonly 100,000 units; broker contracts can differ.
- Long
- A position benefiting from the instrument’s price rising, before costs.
- Short
- A position benefiting from its price falling, before costs.
See currency pairs explained and a worked practice trade.
Account and cost terms
- Balance
- The account amount after recorded transactions, generally excluding unrealised results on open positions.
- Equity
- The account’s current value including unrealised results and applicable adjustments, according to the platform’s calculation.
- Margin
- Collateral required to support a position. It is not a guarantee of the maximum loss.
- Free margin
- Equity remaining after used margin under the platform’s rules.
- Leverage
- The relationship between exposure and required collateral. It magnifies the effect of price changes relative to committed capital.
- Commission
- An explicit transaction charge. Check whether it is per side or for the complete round trip.
- Rollover or financing
- A charge or credit for holding a position across the provider’s specified time, subject to its terms.
- Slippage
- The difference between an expected or requested price and the execution price. It can be favourable or adverse.
Read the cost guide before comparing account prices.
Orders and execution
- Market order
- An instruction seeking execution at the available price, rather than a guaranteed displayed quote.
- Limit order
- An instruction to execute at a specified price or better. It may remain unfilled.
- Stop order
- An instruction activated by a trigger condition. A normal stop does not guarantee the fill price.
- Stop-limit order
- A triggered limit order. Its price constraint can prevent execution in a fast move.
- Margin close-out
- A provider’s process for closing positions when account conditions cross its thresholds. Details vary.
Research and risk
- Drawdown
- A decline from a previous peak in an account or performance series. State whether it refers to balance, equity or another measure.
- Correlation
- A statistical description of how two series moved together over a chosen period. It can change.
- Backtest
- A simulation of rules on historical data. Results depend on data and assumptions.
- Overfitting
- Developing rules so closely around a historical sample that they may not generalise to other conditions.
- CFD
- A contract for difference providing exposure to price changes without ownership of the underlying asset.
- Negative balance protection
- A protection limiting certain account losses under applicable rules or contract terms. It is not universal and does not prevent loss of account funds.
Continue with position sizing, automation and demo practice. Forex and CFDs can cause substantial losses; read Risk of Loss.