Clear, short definitions of 105+ trading and market terms, from ‘account balance’ to ‘zero balance’. Jump to any letter, or look a term up as you meet it. Part of the free Bharat Sky Academy.
A quick reference for the words you’ll meet while trading. Want the key concepts explained in depth, with examples? See Trading Terminology.
Account balance
The amount of money in your trading account, not counting the profit or loss of open positions.
Account equity
Your balance adjusted for the running profit or loss of any open positions.
Ask price
The price at which you can buy an instrument. Always the higher of the two quoted prices.
Asset class
A group of instruments that behave similarly, such as forex, indices, metals, energies, shares or ETFs.
Automated trading
Placing and managing trades with a program (an Expert Advisor) rather than manually.
Averaging down
Adding to a losing position to lower the average entry price. A high-risk approach.
Backtesting
Testing a trading strategy against historical price data to see how it would have performed.
Base currency
The first currency in a forex pair; the price shows how much of the quote currency buys one unit of it.
Bear market
A market in a sustained downtrend, marked by falling prices and negative sentiment.
Bid price
The price at which you can sell an instrument. Always the lower of the two quoted prices.
Broker
A firm that gives traders access to the markets and executes their orders.
Bull market
A market in a sustained uptrend, marked by rising prices and positive sentiment.
Candlestick
A chart element showing the open, high, low and close of a period in a single shape.
CFD
A Contract for Difference: an agreement to exchange the change in an instrument’s price without owning the asset.
Commission
A separate, published charge per lot, used on raw-spread accounts in place of a wider spread.
Commodity
A raw material or resource that can be traded, such as gold, silver, oil or natural gas.
Contract size
The number of units of the underlying that one lot of an instrument represents.
Counter currency
Another name for the quote currency, the second currency in a forex pair.
Cross pair
A forex pair that does not include the US dollar, such as EURGBP.
Demo account
A practice account funded with virtual money, used to trade in real market conditions without risk.
Deposit
Adding funds to your trading account.
Depth of market
A view of the buy and sell orders at different prices for an instrument.
Drawdown
The fall from a peak in account value to a later low; a measure of loss over a period.
ECN
Electronic Communication Network: a model that connects traders to liquidity providers directly.
Equity
See account equity: balance plus or minus the profit or loss of open positions.
ETF
Exchange-Traded Fund: a basket of assets traded as a single instrument, often as a CFD.
Execution
The process of filling your order in the market.
Expert Advisor (EA)
An automated program on MetaTrader 5 that trades according to rules you set.
Exposure
The total value of the market positions you hold, and therefore your risk.
Fill
The completion of an order at a given price.
Free margin
The equity available to open new positions or absorb losses, after margin used by open trades.
Fundamental analysis
Assessing an instrument using economic data, news and events rather than price patterns.
Gap
A jump in price between one period’s close and the next period’s open, with no trading in between.
Going flat
Closing all positions so you have no exposure to the market.
Going long
Buying an instrument to profit from a rise in its price.
Going short
Selling an instrument to profit from a fall in its price.
Hedging
Holding offsetting positions to reduce exposure to a particular risk.
Index
A measure of the performance of a group of companies, such as the US500 or NAS100.
Instrument
Anything you can trade, a currency pair, index, metal, energy, share or ETF.
Japanese candlestick
A charting method, originating in Japan, that shows the open, high, low and close of each period as a candle.
Jobbing
A very short-term trading style that aims to profit from small price moves, similar to scalping.
JPY (Japanese Yen)
The currency of Japan and one of the most traded in the world; the quote currency in pairs such as USDJPY.
Keltner Channel
A technical indicator that plots bands around a moving average to show volatility and potential breakouts.
Kiwi (NZD)
A common market nickname for the New Zealand dollar.
Know Your Customer (KYC)
The identity-verification process required to open and fund a live account, part of regulation. See also Verification.
Leverage
Borrowed exposure that lets you control a larger position with a smaller deposit, magnifying gains and losses.
Limit order
An order to buy or sell only at a set price or better, not yet reached by the market.
Liquidity
How easily an instrument can be traded without moving its price.
Long position
A bought position that profits if the price rises.
Lot
A standard unit of trade size; a standard lot is 100,000 units of the base currency.
Major pair
A heavily traded forex pair that includes the US dollar, such as EURUSD or USDJPY.
Margin
The deposit required to open and maintain a leveraged position; collateral, not a fee.
Margin call
A warning that equity has fallen close to the minimum needed to keep positions open.
Margin level
Equity as a percentage of the margin used; it falls as losses grow.
Market order
An instruction to buy or sell immediately at the best available price.
Metals
Precious metals traded as instruments, such as gold (XAUUSD) and silver (XAGUSD).
MetaTrader 5 (MT5)
A widely used trading platform offering charting, analysis and automated trading.
Minor pair
A less heavily traded forex pair, often a cross without the US dollar.
Negative balance protection
A safeguard that means you cannot lose more than the funds in your account.
Non-dealing-desk (NDD)
Execution that routes orders to the market without a dealing desk deciding the fill.
Open position
A trade that is currently active and exposed to the market.
Order
An instruction to buy or sell an instrument under set conditions.
Overnight financing
See swap: a charge or credit for holding a position past the daily rollover.
Pending order
An order set to trigger in the future when the price reaches a chosen level.
Pip
The standard unit of price movement in forex, usually the fourth decimal place of a quote.
Pip value
How much one pip of movement is worth in money, based on the pair and trade size.
Pipette
A tenth of a pip; the fifth decimal place on many forex quotes.
Position
A trade you hold in the market, long or short.
Quote
The current buy and sell prices for an instrument.
Quote currency
The second currency in a forex pair, in which the price is expressed.
Rate
The price of one instrument in terms of another, especially in forex.
Requote
A message that the requested price is no longer available, offering a new one.
Retracement
A temporary move against the prevailing trend before it resumes.
Risk management
The practice of controlling how much you can lose, through position sizing, stops and discipline.
Risk-to-reward
The ratio between what you risk on a trade and what you aim to gain.
Rollover
The daily point at which overnight positions are financed, giving rise to swaps.
Scalping
A style of trading that takes many small, short-lived positions.
Sell limit
An order to sell at a specified price above the current market.
Sell stop
An order to sell that triggers at a specified price below the current market.
Short position
A sold position that profits if the price falls.
Slippage
The difference between the expected price of an order and the price it actually fills at.
Spread
The difference between the bid and ask price; the main cost of trading on most accounts.
Stop loss
A preset order that closes a position at a chosen level to cap a loss.
Stop order
An order that triggers once the price reaches a set level.
Stop-out level
The point at which positions are closed automatically to prevent further loss.
Support and resistance
Price levels where a market has tended to stop and reverse, watched by many traders.
Swap
A charge or credit applied for holding a position overnight, based on the instruments involved.
Swap-free
An account or instrument option with no overnight swap charge, available in some cases.
Swing trading
A style of trading that holds positions for days to capture larger moves.
Take profit
A preset order that closes a winning position at a chosen level to lock in the result.
Technical analysis
Assessing an instrument using price charts, patterns and indicators.
Tick
The smallest possible price movement of an instrument.
Trailing stop
A stop loss that follows the market in your favour, locking in gains as price moves.
Trend
The general direction of a market over time, up, down or sideways.
Underlying
The actual asset a CFD is based on, such as a share or commodity.
Verification (KYC)
The identity check required to open and fund a live account, part of regulation.
Volatility
How much and how quickly a market’s price moves.
Volume
The amount of an instrument traded over a period; a gauge of activity.
VPS
A Virtual Private Server used to run trading platforms or Expert Advisors continuously.
Withdrawal
Taking funds out of your trading account, returned to your original payment method.
XAGUSD (Silver)
The symbol for silver priced against the US dollar.
XAUUSD (Gold)
The symbol for gold priced against the US dollar, one of the most watched metals markets.
XTIUSD (US Oil)
The symbol for US (WTI) crude oil, a widely traded energy market.
Yield
The income return on an asset, often expressed as a percentage.
Zero balance
An account with no funds; negative balance protection prevents a balance below zero.
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