Glossary
Forex and trading glossary
Understanding market language is the first step to trading safely. Here are the terms most used in the forex market, in technical analysis and on MetaTrader 4 and MetaTrader 5.
- Forex
- The global currency exchange market, where currencies trade in pairs 24 hours a day, five days a week.
- Currency pair
- A quote relating two currencies, such as EUR/USD. The first is the base currency, the second the quote currency.
- Pip
- The smallest standard price move of a currency pair, usually the fourth decimal (second for yen pairs).
- Spread
- The difference between bid and ask price. It is the main trading cost in the forex market.
- Lot
- Trade size unit. One standard lot equals 100,000 units of the base currency; mini and micro lots also exist.
- Leverage
- A facility that lets you control a position larger than your balance. It magnifies both profits and losses.
- Margin
- The share of your balance locked as collateral to keep a leveraged position open.
- Margin call
- A warning that account equity has fallen below the level required to keep positions open.
- Swap
- Interest credited or debited for holding a position overnight.
- Stop loss
- An order that closes a trade automatically at a defined loss, limiting risk.
- Take profit
- An order that closes a trade automatically once the planned profit is reached.
- Drawdown
- The fall in capital from a peak to a trough. It measures a strategy's worst stretch.
- Price action
- Analysis based on reading price movement directly, without relying on lagging indicators.
- Support and resistance
- Chart areas where price has historically found buyers or sellers.
- MetaTrader 5
- Trading platform with advanced charts, pending orders, indicators and automated robots.
- Expert Advisor
- A trading robot running on MetaTrader that opens and closes trades automatically.
- Copy trading
- A model where one trader's positions are mirrored automatically in a follower's account, as in CopyX.
- Slippage
- The gap between requested and executed price, common in volatile conditions.
- Volatility
- How strongly price moves over a period. Higher volatility means higher risk and opportunity.
- CFD
- Contract for difference: an instrument to trade an asset's price move without owning it.
Put the concepts into practice
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