FX Glossary

The price at which the market (or broker) will sell a currency pair to you. The price you pay when buying.

Measures market volatility by calculating the average range of price movement over a period.

The first currency in a pair. When you buy a pair, you buy the base currency and sell the quote currency.

The price at which the market (or broker) will buy a currency pair from you. The price you receive when selling.

Three bands (middle SMA + upper/lower set at standard deviations) showing volatility and potential overbought/oversold levels.

When price moves above resistance or below support with increased momentum, often starting a new trend.

A fee charged by brokers for executing trades, in addition to or instead of the spread.

A period where price moves sideways within a range, showing indecision before the next move.

The statistical relationship between currency pairs. Positive correlation = move together, negative = move opposite.

Currency pairs that don't include USD. Also called cross-currency pairs or crosses. Examples: EUR/GBP, GBP/JPY, EUR/CHF.

Two currencies quoted against each other. The first is the base currency, the second is the quote currency.

Opening and closing all trades within the same day. No overnight positions.

The ability to stick to your trading plan and rules regardless of emotions.

When price makes new highs/lows but indicator doesn't. Often signals trend weakness or reversal.

The peak-to-trough decline in account value during a specific period. Expressed as a percentage.

A moving average that gives more weight to recent prices, making it more responsive to new information.

Your account balance plus or minus any floating profit/loss from open positions.

Pairs with a major currency and an emerging market currency. Higher spreads and volatility. Examples: USD/TRY, EUR/ZAR.

Mathematical ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) used to identify potential support, resistance, and retracement levels.

Fear Of Missing Out - the emotional urge to enter a trade because you fear missing a big move.

The amount of equity in your account not tied up in open positions. Available for opening new trades.

Opening an opposite position to reduce or offset risk from an existing position.

Borrowed capital that allows you to control larger positions with smaller deposits. Expressed as a ratio like 1:100 or 1:500.

An order to buy or sell at a specific price or better. Only executes when the market reaches your price.

Buying a currency pair expecting the price to rise. Profit when price goes up.

A standardized unit of currency in forex trading. Standard lot = 100,000 units, mini lot = 10,000, micro lot = 1,000, nano lot = 100.

Moving Average Convergence Divergence - shows relationship between two EMAs. Measures trend direction and momentum.

The most traded currency pairs, all including USD: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, NZD/USD.

The amount of money required to open and maintain a leveraged position. It's essentially a good-faith deposit.

A warning from your broker that your account equity has fallen below the required margin level.

The ratio of equity to used margin, expressed as a percentage. Formula: (Equity / Used Margin) × 100.

An order to buy or sell immediately at the current market price. Fastest execution but price may vary.

Currency pairs that don't include USD but include major currencies like EUR, GBP, JPY. Examples: EUR/GBP, EUR/JPY.

An indicator showing average price over a period, smoothing out fluctuations to reveal the trend.

A condition where price has risen too fast and may be due for a pullback or reversal.

A condition where price has fallen too fast and may be due for a bounce or reversal.

Taking too many trades, often due to boredom, FOMO, or trying to recover losses quickly.

An order placed but not yet executed, waiting for the market to reach a specified price level.

The smallest price movement in a currency pair. For most pairs, it's the fourth decimal place (0.0001). For JPY pairs, it's the second decimal (0.01).

A fractional pip, representing the fifth decimal place in most currency pairs. 10 pipettes = 1 pip.

Determining how many lots to trade based on your risk tolerance and account size.

Long-term trading style holding positions for weeks, months, or years based on fundamental analysis.

Trading based on raw price movements without indicators. Uses candlestick patterns and chart structure.

A temporary reversal within a trend. A pause before the trend continues.

The second currency in a pair. Shows how much of this currency is needed to buy one unit of the base currency.

A market condition where price bounces between support and resistance without a clear trend.

A price level where selling pressure is strong enough to prevent further price increase.

A temporary price reversal against the main trend, often measured using Fibonacci levels.

Emotional trading to recover losses, often leading to larger losses.

The ratio between potential loss and potential profit. A 1:2 ratio means risking $1 to potentially make $2.

The process of extending the settlement date of an open position. Swap fees are applied during rollover.

A momentum oscillator (0-100) measuring speed and magnitude of price changes. Above 70 = overbought, below 30 = oversold.

A trading style taking many small profits from tiny price movements, holding for seconds to minutes.

Selling a currency pair expecting the price to fall. Profit when price goes down.

The difference between the expected price of a trade and the actual execution price. Common during high volatility.

A moving average calculated by adding prices over a period and dividing by the number of periods.

The difference between the bid (sell) and ask (buy) price. This is how brokers make money on each trade.

A momentum indicator (0-100) comparing closing price to price range. Above 80 = overbought, below 20 = oversold.

An order to close a position at a specific price to limit losses. Essential for risk management.

An order to buy above or sell below the current price. Used for breakout trading or to limit losses.

When your broker automatically closes your positions because margin level dropped below the stop out level.

A price level where buying pressure is strong enough to prevent further price decline.

Interest paid or earned for holding a position overnight. Based on the interest rate differential between the two currencies.

Holding positions for days to weeks to capture medium-term price swings.

An order to automatically close a position when price reaches a target profit level.

A comprehensive document defining your trading strategy, rules, risk management, and goals.

The emotional and mental aspects of trading that can influence decision-making and performance.

A stop loss that moves with the price as it goes in your favor, locking in profits while still giving room to run.

The general direction of price movement. Can be uptrend (bullish), downtrend (bearish), or sideways (ranging).

The degree of price fluctuation over time. High volatility = large price swings, low volatility = smaller movements.