Trading has its own vocabulary, and many terms mean something slightly different from everyday speech. This glossary explains 155 terms used across BrokerCheck in plain words, in alphabetical order, with links to the guides and tools that go deeper. Definitions are general: brokers and platforms can use some words in their own way, so check the terms of the firm you use.
How to use this glossary
Jump to a letter, or use the contents list. A linked term inside a definition is explained elsewhere in the list. Where a term has a guide or a calculator on BrokerCheck, the definition links to it.
A · B · C · D · E · F · G · H · I · K · L · M · N · O · P · Q · R · S · T · V · W · Z
A
Account currency – The currency in which an account is held and in which profit, loss and fees are reported. When an instrument is quoted in another currency, results are converted into the account currency.
Algorithmic trading – Trading in which a program places orders by coded rules. In MetaTrader such programs are called Expert Advisors.
Ask – The price at which you can buy an instrument. It is higher than the bid, and the gap between the two is the spread. Also called the offer price.
Asset class – A group of instruments with similar traits, such as currencies, shares, indices, commodities and cryptocurrencies.
ATR (average true range) – A measure of volatility introduced by J. Welles Wilder. The true range of a candle is the largest of its high minus its low, the distance from the previous close to its high and the distance from the previous close to its low. The ATR averages the true range over a set number of candles, usually 14. It measures size, not direction.
B
Backtesting – Applying a set of trading rules to past prices to see how they would have performed. The result depends on data quality, trading costs and whether the rules were tuned on the same data. See the backtesting guide.
Balance – The money in a trading account, not counting the profit or loss of open positions. It changes when positions close and when money is deposited or withdrawn. Compare equity.
Base currency – The first currency of a pair. In EURUSD it is the euro, and the price shows how many units of the quote currency one unit of the base currency costs.
Bear market – A long period of falling prices. A fall of 20 percent or more from a recent high is a common rule of thumb for calling a market bearish.
Bearish – Expecting, or describing, falling prices. A bearish candle closes below its open.
Bid – The price at which you can sell an instrument. It is lower than the ask.
Bollinger Bands – An indicator made of a moving average and two bands set a number of standard deviations above and below it, commonly 20 candles and 2 deviations. The bands widen when volatility rises. Created by John Bollinger.
Breakeven – The price at which a position has neither profit nor loss once costs are counted. Moving a stop-loss to breakeven means placing it at that price.
Breakout – A move of price beyond a level that it had failed to pass before, such as support or resistance. Breakouts can fail, and price can fall back into the old range.
Broker – A firm that gives access to financial markets. In retail forex and CFD trading the broker may take the other side of your trade (see market maker) or pass orders on to liquidity providers (see STP and ECN).
Bull market – A long period of rising prices.
Bullish – Expecting, or describing, rising prices. A bullish candle closes above its open.
Buy limit and sell limit – Pending orders to trade at a better price than the current one. A buy limit sits below the market and a sell limit above it. They fill at the set price or better, or not at all. Compare buy stop.
Buy stop and sell stop – Pending orders that become market orders when price reaches a level beyond the current price. A buy stop sits above the market and a sell stop below it. They are used to enter on a breakout, and a stop-loss on a long position works like a sell stop.
C
Candlestick – A chart symbol that shows the open, high, low and close of one period. The body spans open to close, and the thin lines, called wicks or shadows, reach the high and low. See the candlestick patterns guide.
CFD (contract for difference) – A contract that pays the difference between the opening and closing price of an instrument, without owning the instrument. CFDs are traded on margin, so losses can be large and, without negative balance protection, can exceed the money in the account.
Close (closing price) – The last price of a candle’s period. Many rules, such as a breakout confirmed by a close, use closing prices rather than wicks.
Commission – A fee charged per trade or per lot. It is common on raw spread accounts, where the spread is smaller and the cost is charged separately.
Commodity – A raw material traded as an instrument, such as gold, oil or wheat. See the commodities market guide.
Compounding – Earning returns on earlier returns, so that growth builds on itself. See the compound interest calculator.
Contract size – The quantity of the underlying asset that one lot represents, for example 100,000 units of the base currency for a standard forex lot. It differs by instrument and broker.
Correlation – A measure of how closely two instruments move together, from -1 (opposite directions) to +1 (the same direction). Positions in positively correlated markets can concentrate risk when held in the same direction; opposite positions may offset some exposure.
Counterparty risk – The risk that the other side of a contract cannot meet its obligations. With an over-the-counter product such as a CFD, the other side is often the broker, which is one reason to check how a firm holds client money; see segregated funds and investor compensation scheme.
Cross pair – A currency pair that does not include the US dollar, such as EURGBP.
Cryptocurrency – A digital asset secured by cryptography and traded around the clock. Prices can swing widely (see volatility), and CFDs on cryptocurrencies let you trade price moves without owning the coin.
cTrader – A trading platform for forex and CFDs offered by some brokers. See the MetaTrader 5 and cTrader comparison.
Cumulative volume delta – The running total of buyer-initiated volume minus seller-initiated volume over a chosen period. Some platforms estimate this split from price movements rather than identifying the initiating side of each trade. See the cumulative volume delta guide.
Currency pair – Two currencies quoted against each other, such as EURUSD. The first is the base currency and the second the quote currency.
D
Day trading – Opening and closing positions within the same trading day or session. A swap can still apply if a position crosses the broker’s financing cutoff.
Demo account – A practice account with virtual money, usually on the broker’s own platform. See the paper trading guide.
Depth of market – A display of buy and sell prices and, where available, volumes at different levels. On an exchange it shows order-book liquidity; in forex and CFDs it may show only the broker’s available quotes. Availability depends on the instrument, broker and platform.
Derivative – A financial contract whose value depends on an underlying asset, such as a currency pair, a share or an index. A CFD and a futures contract are both derivatives.
Divergence – A situation in which price and an indicator move in different directions, for example price making a lower low while an oscillator makes a higher low. See the RSI divergence guide.
Diversification – Spreading money across instruments that do not all move together, to reduce the effect of any single bad outcome. It reduces a portfolio’s dependence on any one holding but does not remove market risk.
Dividend – A payment that a company makes to its shareholders out of profit. A CFD on a share usually receives or pays a matching adjustment.
Doji – A candle whose open and close are almost equal, so its body is very small. It shows indecision in that period and is not a reversal signal on its own.
Dollar-cost averaging – Investing a fixed amount at regular intervals whatever the price, which buys more units when prices are low and fewer when they are high. See the guide to dollar-cost averaging in crypto and the average cost calculator.
Drawdown – The fall from a peak to a later low in account value, usually given as a percentage. The maximum drawdown is the largest such fall over a period. See the risk management guide.
E
ECN (electronic communication network) – A network in which orders from many participants meet. In retail forex, an ECN account usually means raw spreads plus a commission, with orders passed to liquidity providers. The label is used loosely, so check how the broker describes its execution.
Economic calendar – A schedule of upcoming data releases and events, such as inflation figures, employment reports and central bank decisions, that can move prices. Many platforms and websites publish one, usually with a forecast and the previous figure.
EMA (exponential moving average) – A moving average that gives more weight to recent prices, so it reacts faster than a simple moving average. See the EMA guide.
Engulfing pattern – A two-candle pattern in which the body of the second candle completely covers the body of the first. A bullish engulfing pattern is a down candle followed by a larger up candle; a bearish one is the reverse. See the engulfing patterns guide.
Equity – The current account value, usually the balance plus floating profit or loss, with credit, commissions and blocked amounts included according to the platform’s rules. Margin calls and stop-outs are based on it.
ETF (exchange-traded fund) – A fund that trades on an exchange like a share and usually tracks an index, a sector or a commodity. See the ETF guide.
Execution – The process of filling an order. Speed and price quality, including slippage and requotes, differ between brokers and market conditions.
Expectancy – The average amount a strategy earns or loses per trade: win rate times average win, minus loss rate times average loss. It needs many trades to be reliable. See win rate.
Expert Advisor (EA) – An automated trading program that runs inside MetaTrader and places orders by coded rules. It is often run on a VPS so that it keeps running.
Exposure – The total market value you have at risk in a position or portfolio. With leverage it is larger than the margin you put up.
F
Fair value gap (FVG) – A three-candle pattern in which the range of the third candle does not overlap the range of the first, leaving a gap that some traders expect price to revisit. See the fair value gap guide.
Fibonacci retracement – Horizontal levels drawn between a swing high and a swing low, usually at 23.6, 38.2, 61.8 and 78.6 percent of the move and often also 50 percent, where traders watch for a retracement to pause.
Fill – The execution of an order at a price. A partial fill executes only part of the order size.
Fixed spread and variable spread – A fixed spread stays the same in normal conditions. A variable, or floating, spread changes with liquidity and can widen sharply around news.
Floating profit or loss – The profit or loss of open positions at current prices, also called unrealised. It becomes realised when the position is closed.
FOMO (fear of missing out) – The urge to enter a trade late because price is moving without you. It is a common cause of poor entries. See the trading psychology guide.
Forex (FX) – The foreign exchange market, where currencies are traded in pairs. It is open around the clock from Monday to Friday. See the forex market hours tool.
Free margin – equity minus the margin already in use. It is what remains to open new positions or absorb losses.
Fundamental analysis – Judging an instrument by economic and financial data, such as interest rates, company earnings, or supply and demand, rather than by price charts alone. Compare technical analysis.
Futures contract – A standardised exchange-traded contract to buy or sell an underlying asset at a set price on a future date, settled through delivery or cash according to its terms. Some CFDs follow futures prices.
G
Gap – A jump between one candle’s close and the next candle’s open, with no trading in between. Gaps are common in shares and indices after the market has been closed, and can appear in forex after the weekend. A stop-loss can fill beyond its price after a gap; see slippage.
GTC (good till cancelled) – An order that stays active until it is filled or you cancel it, rather than ending at the close of the day. Some brokers still cancel such orders in certain cases, for example when a contract expires.
H
Hedging – Opening a position that offsets the risk of another, such as buying and selling the same instrument at the same time. Whether it is allowed depends on the account type; see netting.
Higher high and higher low – A rising sequence of swing highs and swing lows, which traders read as an uptrend. The mirror image, lower highs and lower lows, is read as a downtrend.
I
Index – A basket of shares that tracks a market or sector. An index CFD lets you trade the basket’s price moves.
Indicator – A calculation drawn on a chart from price or volume, such as a moving average or the RSI. Indicators describe past and current market data; they cannot guarantee what prices will do next.
Introducing broker (IB) – A firm or person who refers clients to a broker and is paid for it, for example through a share of the spread or a fixed fee per client.
Investor compensation scheme – A scheme that can compensate eligible clients, up to a limit, when a covered investment firm cannot meet eligible claims, such as returning client money or assets. It does not cover ordinary trading losses. Coverage depends on the scheme, firm, activity and client category.
Islamic account (swap-free account) – An account without swap interest, offered by some brokers to clients whose religion forbids paying or receiving interest. A broker may charge another fee instead.
K
KYC (know your customer) – Checks used to identify and verify a client and understand the purpose of the account, generally when the relationship begins and on an ongoing basis. Further checks may be required for transactions or withdrawals.
L
Leverage – The ratio between the size of a position and the margin needed to hold it. At 1:30, each unit of margin controls 30 units of exposure, which multiplies gains and losses alike. For retail CFDs, EU national rules generally cap major currency pairs at 1:30, as do UK FCA rules. Lower limits apply to other asset classes, and national exceptions exist.
Limit order – An order to buy at a set price or lower, or to sell at a set price or higher. It fills only at that price or better and may not fill at all. See buy limit.
Linear regression channel – A channel with parallel boundaries around a least-squares best-fit line through prices over a chosen period. The boundary spacing depends on the platform or indicator settings. See the linear regression channel guide.
Liquidity – How easily an instrument can be bought or sold without moving its price. Liquid markets have tight spreads and deep order books, and thin markets move more on each order.
Liquidity provider – A bank or large firm that quotes prices at which others can trade, which supplies the prices that brokers pass on to clients.
Long – A position that profits when the price rises. Buying to open is going long. Compare short.
Lot – The standard unit of trade size. In forex a standard lot is usually 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. Other instruments use other sizes; see contract size.
M
MACD – Moving average convergence divergence, an indicator built from the difference between a 12-period and a 26-period EMA, with a 9-period average of that difference as a signal line. Those are the usual settings. See the MACD guide.
Margin – The money set aside as security to open and hold a leveraged position. Required margin is roughly the value of the position divided by the leverage.
Margin call – A warning, or a demand for more funds, when equity falls too close to the margin in use. If the margin level keeps falling, positions are closed at the stop-out level.
Margin level – equity divided by the margin in use, as a percentage. A low value means little room before a margin call.
Market maker (dealing desk) – A broker that quotes its own prices and takes the other side of client trades. This can allow fixed spreads but creates a conflict of interest. See also STP and ECN.
Market order – An order to buy or sell at once at the best available price. Execution depends on available liquidity and trading conditions, and the price can differ from the one you saw; see slippage.
MetaTrader 4 and MetaTrader 5 – Trading platforms from MetaQuotes that many brokers supply. MetaTrader 5 is the newer one, with more timeframes and order types. See the MetaTrader 4 and 5 comparison.
Moving average – A calculation that smooths a series of prices over time, often using candle closes. A simple moving average weights all candles equally, while the EMA weights recent ones more. See the moving average crossover guide.
N
Negative balance protection – A safeguard under which a retail client cannot lose more than the money in the account. Regulators in some countries require it for retail clients, and some brokers offer it voluntarily. Check your broker’s terms.
Netting and hedging accounts – In MetaTrader 5, a netting account allows one net position per instrument; further deals can increase, reduce, close or reverse it. A hedging account allows multiple separate positions in the same instrument, including opposite positions.
O
OCO (one cancels the other) – Two linked orders, such as a take-profit and a stop-loss, where filling one cancels the other. Not every platform supports it.
Order block – A zone marked on a chart from the last opposite candle before a strong move. See the order blocks guide.
Oscillator – An indicator that swings between fixed limits or around a zero line, such as the RSI or the MACD. Traders use oscillators to judge momentum and to flag overbought or oversold readings.
Overbought and oversold – Labels used with oscillators such as the RSI. Overbought means that price has risen far and fast, and oversold that it has fallen far and fast. In a strong trend an indicator can stay in these zones for a long time, so they are not signals on their own.
Overtrading – Trading too often or in too large a size, often after losses or from boredom, so that costs and mistakes mount.
P
Paper trading – Practising with virtual money at real prices. See the paper trading guide.
Pending order – An order that waits until price reaches a level you set, such as a limit order or a buy stop.
Pip – The standard unit for a price move in a currency pair: the fourth decimal place for most pairs (0.0001) and the second for pairs quoted in yen (0.01). Many brokers quote a tenth of a pip, called a pipette. The pips calculator turns a move into money.
Pip value – The money value of a one-pip move for a given position size and instrument, in the account currency. See the pips calculator.
Pipette – A tenth of a pip: 0.00001 for most pairs and 0.001 for pairs quoted in yen. In MetaTrader, a point is one unit of the last quoted decimal place, so a pip equals ten points on five-decimal quotes and three-decimal yen quotes. A point can differ from the minimum trading increment, called tick size.
P&L – Profit and loss. See floating profit or loss.
Position – A trade that is open, long or short, and carries a floating profit or loss until it is closed.
Position size – How many units or lots you trade. It should follow from the risk you accept and the distance to your stop-loss. See the position size calculator.
Price action – The movement of an instrument’s price over time. Price-action trading bases decisions on that movement, using candles, swing highs and lows and levels, with few or no indicators.
Profit factor – Gross profit divided by gross loss over a set of trades. A value above 1 means gross profit exceeded gross loss. It says nothing about drawdown or about how many trades the result rests on.
Prop firm (proprietary trading firm) – A business that trades its own capital. The label is also used by firms that sell trading evaluations to retail traders; the accounts they provide may be simulated rather than live, and payouts follow the firm’s terms. Rules, fees and payout terms differ widely.
Q
Quote – The current bid and ask prices of an instrument.
Quote currency – The second currency of a pair, in which the price is expressed. In EURUSD it is the US dollar.
R
Range – A period in which price moves sideways between support and resistance instead of trending. Also called consolidation.
Raw spread account – An account marketed as offering spreads from liquidity providers with little or no markup, usually with a separate commission. The label does not by itself establish how orders are executed.
Regulated broker – A broker authorised and supervised by a financial regulator, which sets rules on client money, conduct and reporting. Regulation varies widely in strictness, so check the licence on the regulator’s own register.
Repainting – When an indicator changes values it has already drawn on earlier candles, so a chart looking back shows signals that were not visible in real time. The ZigZag indicator is a common example, and a backtesting result built on a repainting indicator can look better than live trading would.
Requote – A broker’s offer of a new price after your order arrived, because the price had moved. You can accept or decline it. Requotes are more common with instant execution in fast markets.
Resistance – A price level or zone where rises have repeatedly stalled because sellers appeared. Compare support.
Retracement (pullback) – A temporary move against the main trend, after which the trend may resume. See Fibonacci retracement.
Reversal – A change in the direction of the prevailing trend. It is often only clear after the fact.
Risk of ruin – The probability of losing so much that you cannot continue trading, given your win rate, reward-to-risk ratio and risk per trade. See the risk of ruin calculator.
Risk per trade – The amount you accept to lose if a trade hits its stop-loss, usually set as a small percentage of the account.
Risk-reward ratio – The potential loss on a trade compared with its potential gain. Risking one unit to target two is a risk-reward ratio of 1:2, equivalent to a reward-to-risk ratio of 2, before costs. See the risk-reward calculator.
Rollover – In forex, carrying a position into the next value date, often with a swap debit or credit. For futures, rollover means replacing a contract nearing expiry with a later-dated one.
RSI (relative strength index) – An oscillator from 0 to 100 that compares the size of recent gains and losses, over 14 candles by default. Readings above 70 are conventionally called overbought and readings below 30 oversold. See the RSI divergence guide.
S
Scalping – A very short-term style that aims for small gains from many trades, usually held for seconds to minutes. The spread and commission matter a great deal.
Segregated funds – Client money held in accounts separate from the broker’s own money. Many regulators require it, but it does not remove every risk.
Short – A position that profits when the price falls. Selling to open is going short. Compare long.
Slippage – The difference between the price you expected and the price at which an order is filled. It happens when prices move quickly or liquidity is thin, and it can work for or against you. See also requote.
Spread – The difference between the ask and the bid price. It is a cost you pay when you open a trade, and it can widen when markets are thin or news is due.
Stock (share) – A unit of ownership in a company. See the stocks beginner guide.
Stop-limit order – A pending order that becomes a limit order, rather than a market order, when price reaches its trigger level. It controls the worst price you will accept but may not fill if price moves past the limit. MetaTrader 5 calls these buy stop limit and sell stop limit orders.
Stop-loss – An order that closes a position when price reaches a set level, to limit the loss. In fast markets it can fill at a worse price (see slippage). Some brokers offer a guaranteed stop-loss, usually for a fee, that fills at the set price.
Stop-out level – A threshold, commonly expressed as a margin level, at which a broker starts to close positions automatically. The threshold and closing procedure depend on the broker, account and applicable regulation.
STP (straight-through processing) – Automated processing that routes orders to liquidity providers without manual intervention. In retail forex, the label does not by itself establish whether the broker acts as agent or as your counterparty, or how every order is executed. Compare market maker and ECN.
Supply and demand zones – Areas where a strong move began after a pause, and where traders expect unfilled orders to remain. See the supply and demand zones guide.
Support – A price level or zone where falls have repeatedly stalled because buyers appeared. Compare resistance. A broken support can turn into resistance.
Swap (rollover) – A fee or credit for holding a position past the end of the trading day. It reflects the interest rate gap between the two currencies, or the financing cost of a CFD, plus the broker’s markup. Many brokers apply triple swap on one day a week to cover the weekend; the day depends on the instrument and broker, and holidays can change the schedule. See Islamic account.
Swing high and swing low – A candle high with lower highs on each side, and a candle low with higher lows on each side. They are used to describe structure and to place stops.
Swing trading – Holding positions for days to weeks to capture a larger move. swap matters more over those periods.
T
Take-profit – An order that closes a position when price reaches a set profit level.
Technical analysis – Studying price charts and indicators to judge how price may behave. It rests on the idea that patterns tend to repeat. How useful it is for forecasting is debated.
Tick – A single change in an instrument’s price.
Tick volume – The number of ticks received from a price feed during a candle, rather than the quantity traded. MetaTrader generally uses tick volume for forex; real traded volume is available for instruments whose data provider supplies it.
Ticker (symbol) – The short code that identifies an instrument on a platform, such as EURUSD.
Timeframe – The period each candle covers, such as one minute, one hour or one day. Different timeframes of the same instrument can show opposite trends.
Trading journal – A record of your trades with the reason, the result and the lesson. The trading journal tool gives you a place to start.
Trading session – A period when a financial centre is open and trading there is most active. The main forex sessions are Sydney, Tokyo, London and New York, and they overlap.
TradingView – A charting platform with a social network, a built-in paper trading simulator and links to some brokers. See the MetaTrader 5 and TradingView comparison.
Trailing stop – A stop-loss that follows price at a set distance as it moves in your favour and stays where it is when price moves against you. In MetaTrader desktop, trailing updates require the terminal to be running and connected; the last stop already set remains on the server.
Trend – A sustained move of price in one direction. Sideways movement is called a range.
Trendline – A line drawn through two or more swing highs or swing lows to show the direction of a trend or the edge of a range.
V
Volatility – How much and how fast price moves. High volatility means large swings and often wider spreads. The ATR is one way to measure it.
Volume – The amount traded in a period. For forex and CFDs see tick volume. The on-balance volume guide and the volume profile guide cover tools built on volume.
VPS (virtual private server) – A rented virtual server used to keep an Expert Advisor or a platform running while your own computer is off.
W
WebTrader – A browser-based version of a trading platform that needs no installation.
Wick (shadow) – The thin line above or below a candle’s body that shows the high or low reached in the period.
Win rate – The share of closed trades that made a profit. It means little without the size of the average win and loss; see expectancy.
Z
ZigZag indicator – An indicator that joins significant swing highs and lows and ignores smaller moves. Its last leg can be redrawn as price extends. See the ZigZag guide.
Where to go next
- Practise the vocabulary without risking money in the paper trading guide.
- See how costs and risk fit together in the risk management guide, then size a trade with the position size calculator.
- Compare platforms in the MetaTrader 4 and 5 comparison, or find a broker through the broker matcher.
- Browse every guide in the learning hub.
Risk warning. Trading leveraged products such as forex and CFDs involves a high risk of losing money. Understanding the terms in this glossary does not remove that risk. Nothing on this page is advice or a recommendation to trade.
Frequently asked questions
What is the difference between a pip and a point?
A pip is usually 0.0001 for currency pairs or 0.01 for pairs quoted in yen. In MetaTrader, a point is one unit of the last quoted decimal place: one pip equals ten points on five-decimal quotes and three-decimal yen quotes. The minimum trading increment, or tick size, can differ from a point. See pip and pipette.
What is the difference between balance and equity?
Balance includes deposits, withdrawals, realised trading results and posted charges, but excludes floating profit or loss. Equity includes floating results and any applicable account adjustments, so it moves with the market. Margin calls and stop-outs are based on equity. See balance and equity.
Is a spread the same as a commission?
No. The spread is the gap between the buy and the sell price and is built into the quote. A commission is a separate fee charged per trade or per lot. Some accounts have a small spread plus a commission, and others have a wider spread and no commission. See spread and commission.
Do brokers all use these words in the same way?
Mostly, but not always. Labels such as ECN, STP or raw spread are used loosely in marketing, and platforms name some order types differently. Read a broker’s own account terms and execution policy before relying on a label.
A term I need is missing. Where can I look?
The platform’s help pages explain its own terms and order types, and the regulator of your broker usually publishes investor guides. The guides in the learning hub define terms where they first use them.
