Trading glossary

Every word on a platform, a chart or a statement, explained in one sentence and then in plain language. 64 terms.

Definitions only. Nothing here is financial advice, and nothing here tells you what to trade.

The basics

The words on every chart and every ticket.

Pip
A pip is the standard small step a price moves in, the fourth decimal place on most currency pairs.
Point
A point is the smallest digit a broker quotes, usually a tenth of a pip.
Lot
A lot is the unit a trade is sized in, and one standard lot is 100,000 units of the base currency.
Contract size
Contract size is how many units of the thing you are trading sit inside one lot.
Pip value
Pip value is what one pip of movement is worth in money on your position.
Bid and ask
The bid is the price you can sell at, the ask is the price you can buy at, and the ask is always the higher of the two.
Base and quote currency
In EURUSD the euro is the base and the dollar is the quote, so the price says how many dollars one euro costs.
Long and short
Long means you bought and gain when the price rises; short means you sold and gain when it falls.
Position
A position is a trade that is currently open, with its size, direction and open price.
Timeframe
A timeframe is how much time one candle on the chart covers.
Candlestick
A candlestick shows four prices for one period: the open, the high, the low and the close.

Orders and execution

How an instruction reaches the market, and what happens to it there.

Market order
A market order asks to trade right now, at whatever price is available.
Limit order
A limit order waits to trade at a price you name, or better, and never worse.
Stop order
A stop order becomes a market order once price passes the level you set.
Stop loss
A stop loss is a resting order that closes a position once it has lost a set amount.
Take profit
A take profit is a resting order that closes a position once it has gained a set amount.
Slippage
Slippage is the difference between the price you asked for and the price you got.
Execution
Execution is the broker turning your instruction into an actual trade at an actual price.

What it costs

Every charge between the price you see and the money that lands.

Spread
The spread is the gap between the buy price and the sell price, and it is the first cost of every trade.
Commission
Commission is a fixed charge per lot on accounts that show raw spreads.
Swap
Swap is the charge or credit for holding a position overnight.
The full cost of a trade
The full cost is the spread, plus any commission, plus swap for every night the position is held.
Rollover
Rollover is the moment each day when the broker rolls open positions to the next value date and applies swap.

Risk and the account

The numbers that decide how long an account survives.

Balance
Balance is the money in the account from closed trades only.
Equity
Equity is your balance plus or minus everything currently open. It is what the account is worth right now.
Floating profit and loss
Floating profit or loss is the result of open positions if they were closed at this instant.
Leverage
Leverage is the broker letting you control a position much larger than the money you put up.
Margin
Margin is the deposit the broker sets aside while a position is open.
Free margin
Free margin is the part of your equity that is not locked, and it is what can open new positions or absorb losses.
Margin level
Margin level is equity divided by margin in use, shown as a percentage, and it is the health reading of an account.
Margin call
A margin call is the broker's warning that your margin level has fallen to their first threshold, often 100 percent.
Stop out
A stop out is the broker closing your positions because your margin level fell below their limit.
Drawdown
Drawdown is how far an account has fallen from its highest point.
Risk per trade
Risk per trade is the amount you lose if the stop loss is hit, usually set as a percentage of the account.
Risk to reward
Risk to reward compares the distance to your stop with the distance to your target.
Liquidity
Liquidity is how much can be traded at a price without moving it.
Invalidation level
A stated price or event that would make a particular chart interpretation no longer fit its own rules.
Risk-to-reward ratio
A comparison between a defined potential loss distance and a defined potential gain distance.

Platform and clock

MetaTrader, brokers, symbols and the time on the chart.

MetaTrader 4 and 5
MetaTrader is the platform most retail brokers give you to trade, chart and run automated programs.
Broker server time
Server time is the broker's clock, and it is the time stamped on every candle, not your local time.
Symbol
A symbol is the broker's name for one tradable instrument, and the suffix on the end tells you which account type it belongs to.
Expert Advisor
An Expert Advisor is a program attached to a MetaTrader chart that can place and manage orders automatically.
Trading sessions
The trading day is usually described in three sessions, Asia, London and New York, that overlap as the world wakes up.
Gap
A gap is a jump between one candle's close and the next one's open, with no trading in between.
Hedging and netting
A hedging account can hold a buy and a sell on the same symbol at once; a netting account merges them into one position.

Gold

Where gold works differently from a currency pair.

XAUUSD
XAUUSD is gold priced in US dollars, where XAU is the code for one troy ounce of gold.
Troy ounce
A troy ounce is the unit gold is priced in, and it is about 31.1 grams.
Gold pip value
Most traders count 10 cents as one pip on gold, worth 10 dollars on a 100 ounce lot; MetaTrader's smallest step is a 1 cent point.
Gold trading hours
Spot gold trades about 23 hours a day from Sunday night to Friday night, with a daily break of about an hour and a weekend close.
Gold daily range
Over the last 12 months gold's typical day moved about 92 US dollars from high to low, roughly 2 percent of its price, or about 920 pips counting 10 cents as a pip.
Gold in rand
A rand gold price is the dollar price converted at the current USDZAR rate, which is why it can rise while the dollar price stands still.

Chart structure

The vocabulary a chart reader uses to describe what price has already done.

Support
A price area where declines previously slowed, paused or reversed.
Resistance
A price area where advances previously slowed, paused or reversed.
Trend
A sustained directional tendency in price over a chosen observation window.
Market structure
A chart description based on the sequence of visible swing highs and swing lows.
Swing high
A local price peak with lower highs visible on each side under a chosen detection rule.
Swing low
A local price trough with higher lows visible on each side under a chosen detection rule.
Higher high (HH)
A swing high whose price is above the preceding comparable swing high.
Higher low (HL)
A swing low whose price is above the preceding comparable swing low.
Lower high (LH)
A swing high whose price is below the preceding comparable swing high.
Lower low (LL)
A swing low whose price is below the preceding comparable swing low.
Breakout
Price moving beyond a level or boundary that a chart reader had previously marked.
Retest
A later return toward a previously crossed or marked chart area.
Order block
A discretionary chart label for a candle or price area believed to precede a strong move.
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