Forex & CFD Glossary
70 terms, plain-English. Jump to a letter, or scroll the full list.
A
Algorithmic trading. Using computer programs to place orders automatically under preset rules; common examples are EAs (Expert Advisors).
The ask (offer) price. The price at which a market maker or liquidity provider is willing to sell the base currency, usually above the bid; spread = ask minus bid.
An asset. The underlying instrument itself, such as a currency, stock, gold, oil or index.
B
The base currency. The first currency in a pair, the one being bought or sold in quantity, e.g. EUR in EUR/USD.
Basis point (bp). 1 bp = 0.01%, commonly used to describe changes in interest rates or spreads.
A bear market. A market environment where prices are generally falling.
The bid price. The price at which the market is willing to buy the base currency, usually below the ask.
A broker. A financial intermediary connecting traders to the market, providing platform, liquidity and execution.
A bull market. A market environment where prices are generally rising.
C
A carry trade. Borrowing in a low-interest currency to buy a high-interest one to earn the rate differential, carrying exchange-rate and reversal risk.
A cent account. A micro account denominated in cents, suited to testing strategies with very small capital.
Contract For Difference. A derivative where the trader bets on the price movement of an asset without owning it; profit/loss = price difference times size.
A commission. A fee the broker charges per traded lot, common on ECN/Raw accounts (charged on top of the spread).
Consumer Price Index. A core measure of inflation; its release often triggers volatility.
A currency pair. The relative quote of two currencies, e.g. EUR/USD; the first is the base, the second the quote.
D
Day trading. A style of opening and closing positions within the same trading day, with no overnight hold.
A demo account. A practice account using virtual funds and mirroring real market prices, with zero risk.
Drawdown. The decline of account equity from its peak to its trough, measuring strategy risk.
E
Electronic Communication Network. An execution model connecting directly to interbank liquidity, with low spreads and a separate commission.
Equity. Account balance plus the floating profit/loss of open positions.
The exchange rate. The ratio at which one currency is exchanged for another.
F
Fiat currency. Money backed by government credit with no physical anchor, such as the US dollar or euro.
A floating spread. The bid/ask gap that varies with market liquidity - tighter in active sessions, possibly widening on news.
Foreign Exchange. The world's largest financial market, trading the currency pairs of nations.
Fundamental analysis. Judging currency direction via macro data such as interest rates, employment and GDP.
G
Gross Domestic Product. A core measure of a country's economic output.
H
A handle. Trader slang for a round number, e.g. 'at the 1.10 handle' means price near 1.10.
A hedge. Opening an opposite position to offset the risk of an existing one.
I
An index. The price-weighted performance of a basket of assets, e.g. the S&P 500; tradeable as a CFD.
Inflation. A broad rise in prices and fall in money's purchasing power, influencing central-bank rate decisions.
The interest rate. The cost of capital set by a central bank, a core mid/long-term driver of exchange rates.
An Islamic (swap-free) account. One that charges no swap, compliant with Sharia law.
J
The Japanese yen (JPY). A major safe-haven currency, often used as funding currency in carry trades.
K
L
Leverage. A multiplier that lets you control a larger position with a small margin, amplifying both gains and losses.
Liquidation. The broker forcibly closing positions when margin is insufficient to protect itself.
Liquidity. The ability to fill trades quickly without moving the price; the more active, the smaller the slippage.
A lot. A standard trade size: 1 standard lot = 100,000 base units; a micro lot = 1,000.
M
Major pairs. The 7 most liquid pairs containing USD, e.g. EUR/USD, GBP/USD.
Margin. The collateral funds tied up to open a position; not a fee.
A margin call. When equity falls below the maintenance margin requirement, the broker asks for more funds or reduction of positions.
Minor pairs. Cross pairs without USD but containing a major currency, e.g. EUR/GBP.
A moving average. A technical indicator smoothing price action, commonly MA/EMA.
N
Negative balance protection. A regulatory safeguard (mandatory in some jurisdictions) that losses cannot exceed principal and equity cannot go negative.
Non-Farm Payrolls. The US monthly employment report, a major volatility source for forex.
O
One-Cancels-the-Other order. Triggering one automatically cancels the other.
An order. A trade instruction, including market, limit and stop orders.
P
Percentage Allocation Management Module. A copy / fund-management model where multiple investors' capital is pooled and traded by a single manager.
A pip. The smallest quote unit for most pairs, typically the 4th decimal (0.0001).
A pipette (micro-pip). One tenth of a pip, i.e. the 5th decimal (0.00001).
A position. A currently held long or short exposure.
Q
The quote currency. The second currency in a pair, used to price it, e.g. USD in EUR/USD.
R
Resistance. A price area where rising price often meets sellers and pulls back.
A retracement. A temporary counter-trend move within a trend.
Risk management. The discipline and methods of controlling losses via position sizing, stops and diversification.
Rollover (swap). The interest differential incurred for holding a position overnight, which can be positive or negative; swap-free accounts are exempt.
S
Scalping. A high-frequency style seeking many tiny profits over very short timeframes.
Slippage. The deviation between expected and executed price, more noticeable in violent moves or low liquidity.
The spread. The difference between ask and bid, the main trading cost for most accounts.
A stop-loss. A preset auto-close price used to cap the loss on a single trade.
Support. A price area where falling price often finds buyers and bounces.
Swap. Overnight interest. See Rollover.
T
A trailing stop. A stop that moves with profit to lock in gains.
A trend. A directional move where price persistently travels one way.
U
The underlying asset. The real asset a derivative (such as a CFD) references.
V
Volatility. The intensity of price movement; higher means both greater risk and opportunity.
W
A weekend gap. The jump between the Friday close and Monday open after the weekend halt.
Y
Yield. The return ratio an asset generates, often bond yield, influencing exchange rates.