Trading glossary
A-Z trading dictionary.
Complete glossary of 80+ terms used in retail trading, broker reviews, and regulatory documents. Reference dictionary for forex, CFD, binary options, prop firms, and trading terminology.
💡 Tip: Use Ctrl+F (or Cmd+F on Mac) to quickly search for any specific term on this page. Terms link to related guides and broker reviews where applicable.
A
5 terms
A-Book Broker
Broker that passes client orders directly to liquidity providers without taking the other side of trades. Generally lower conflict of interest than B-book brokers. ECN brokers are typically pure A-book.
Algorithmic Trading
Trading executed by computer programs following pre-defined rules. Common with Expert Advisors (EAs) on MetaTrader platforms.
ASIC
Australian Securities and Investments Commission. Tier-1 financial regulator. Brokers regulated by ASIC are considered top-tier (IC Markets, Pepperstone, others).
Ask Price
Price at which the broker sells (you buy). Always higher than bid price. Difference between ask and bid = spread.
Average True Range (ATR)
Volatility indicator measuring average price range over a period. Used for setting stop loss distances proportional to recent volatility.
B
6 terms
B-Book Broker
Broker that takes the other side of client trades internally rather than passing to liquidity providers. Inherent conflict of interest — broker profits when client loses. Most retail forex brokers operate hybrid A-book/B-book models.
Bid Price
Price at which the broker buys (you sell). Always lower than ask price.
Binary Options
Fixed-payout trading where you predict if price will be above or below a level at expiry. Has built-in 2-12% house edge mathematically disadvantaging traders. Banned for retail in EU, UK, US.
Bollinger Bands
Volatility indicator showing standard deviation bands above and below a moving average. Used to identify overbought/oversold conditions and volatility expansion.
Breakout
Price moving beyond a defined support or resistance level. Often accompanied by increased volume. Strategy: enter in direction of breakout once confirmed.
Broker
Intermediary connecting retail traders to financial markets. Provides platform, executes trades, holds client funds. Different broker types have different conflicts of interest.
C
6 terms
Candlestick
Chart representation showing open, high, low, and close prices for a time period. Body shows open-close range; wicks show high-low range.
CFD (Contract for Difference)
Derivative contract where you trade price movements of an underlying asset without owning it. Used for stocks, indices, commodities, crypto. Banned for US retail traders.
Commission
Fee charged per trade in addition to spread. Common in ECN/raw spread accounts. Typically $3-$7 per round-trip per standard lot.
cTrader
Trading platform alternative to MetaTrader. Used by some ECN brokers (IC Markets, Pepperstone). Native ECN execution, modern interface.
CySEC
Cyprus Securities and Exchange Commission. EU-tier regulator commonly used by retail forex brokers due to passporting rights. €20,000 investor compensation. (IQ Option, XM, Olymp Trade are CySEC regulated.)
Copy Trading
Service allowing you to automatically replicate trades from selected traders. Available at OctaInvest (OctaFX), HFcopy (HFM), and others.
D
4 terms
Day Trading
Strategy of opening and closing positions within the same trading day. Avoids overnight swap fees. Requires high screen time and discipline.
Demo Account
Practice account with virtual money. Used for learning platforms and testing strategies. Doesn’t replicate emotional pressure of real money trading.
Divergence
When price and indicator move in opposite directions. Bullish divergence: price makes lower low while indicator makes higher low. Used as reversal signal.
Drawdown
Peak-to-trough decline in account equity. Maximum drawdown is the worst case. Critical risk metric for evaluating strategies. Most retail accounts blow up due to inadequate drawdown management.
E
4 terms
ECN (Electronic Communication Network)
Trading model where orders pass directly to liquidity providers without broker intervention. Lower spreads + commission instead of spread markup. IC Markets, Pepperstone are pure ECN brokers.
EMA (Exponential Moving Average)
Moving average that weights recent prices more heavily than older prices. More responsive to recent price changes than SMA.
Equity
Account balance plus unrealized profit/loss from open positions. Different from balance: balance is closed-position result only.
ESMA
European Securities and Markets Authority. Imposed retail trader restrictions in EU including leverage caps (30:1 major forex) and binary options ban.
F
4 terms
FCA (Financial Conduct Authority)
UK financial regulator. Tier-1 regulation, considered gold standard. £85,000 investor protection via FSCS. Strict marketing and operational requirements.
Forex / FX
Foreign exchange market — trading currency pairs. Largest financial market globally. Open 24 hours, 5 days per week.
FSCA
Financial Sector Conduct Authority (South Africa). Regional regulator serving African markets. Common for brokers operating in Africa (HFM, OctaFX, FBS).
Funded Account (Prop Firm)
Demo account labeled “funded” provided by prop firm after passing evaluation. You trade firm rules and receive 80-90% of profits.
G
2 terms
Gap
Price difference between previous candle close and next candle open. Common after weekends or major news events.
GMT (Greenwich Mean Time)
Universal time standard used in forex. Trading sessions reference GMT for consistency across timezones.
H
2 terms
Hedging
Opening offsetting positions to reduce risk. Not allowed at all brokers or all jurisdictions.
High-Frequency Trading (HFT)
Algorithmic trading executing thousands of trades per second. Institutional only — not viable for retail traders.
I
3 terms
IFC (International Financial Commission)
Self-regulatory body for offshore brokers. Provides limited dispute resolution. Not equivalent to government regulation. Affiliated brokers: Pocket Option, Olymp Trade.
Investor Compensation Fund
EU mechanism providing investor protection if broker becomes insolvent. €20,000 protection per investor at CySEC-regulated brokers.
Indicator (Technical)
Mathematical calculation applied to price/volume data. Used to identify trends, momentum, volatility.
L
4 terms
Leverage
Borrowed capital allowing larger position sizes. 1:100 leverage means $1 controls $100 of asset. Higher leverage = higher risk per pip movement. EU retail capped at 30:1 for major forex.
LGPD
Lei Geral de Proteção de Dados (Brazil’s GDPR equivalent). Data protection law for Brazilian users.
Liquidity
Ease of buying/selling without affecting price. High liquidity = tight spreads. Major forex pairs have highest liquidity.
Lot
Standard trade size unit. Standard lot = 100,000 base currency. Mini lot = 10,000. Micro lot = 1,000. Used in position sizing.
M
5 terms
MACD
Moving Average Convergence Divergence indicator. Shows relationship between two moving averages. Used for trend identification and momentum analysis.
Margin
Collateral required to open leveraged positions. Used margin = position size / leverage. Free margin = account equity – used margin.
Margin Call
Broker notification that equity dropped below required margin level. Stop out follows if not corrected — broker forcibly closes positions to prevent negative balance.
Market Maker
Broker that creates internal market for clients rather than passing to liquidity providers. Typically B-book model. Common at retail-focused brokers.
MetaTrader (MT4 / MT5)
Most widely used retail trading platforms. MT4 dominates forex; MT5 adds asset class support. Standard at virtually all major brokers.
N
2 terms
Negative Balance Protection
Broker policy preventing account from going negative. Mandatory under EU regulation. You can’t lose more than account balance.
NFP (Non-Farm Payrolls)
Major US employment data released first Friday monthly. Highest-impact economic release. Triggers significant volatility.
O
3 terms
Offshore Broker
Broker registered in jurisdictions with limited financial regulation (Saint Vincent, Belize, Marshall Islands). Limited or no investor protection. Higher operational flexibility.
OHLC
Open, High, Low, Close prices for a candle/bar. Foundation of price chart analysis.
Overnight Swap
Interest paid/charged for holding positions overnight. Triple swap on Wednesday-Thursday to cover weekend. Can exceed spread costs for position traders.
P
5 terms
Pip
Percentage in Point — smallest price move in forex. For most pairs: 4th decimal place (0.0001). For JPY pairs: 2nd decimal (0.01).
Pin Bar
Single-candle pattern with small body and long wick. Indicates price rejection at key level. Reversal signal.
Position Size
Number of lots/units traded in a single position. Most important risk variable. Should be calculated based on account size, risk %, and stop loss distance.
Prop Firm
Proprietary trading firm providing funded accounts after evaluation. Trader pays evaluation fee, demonstrates profitability, gets funded account if successful.
PSP (Payment Service Provider)
Third-party handling deposits/withdrawals (Skrill, Neteller, Perfect Money). Different brokers offer different PSP options.
R
4 terms
Regulation
Government oversight ensuring brokers maintain capital, segregate funds, follow disclosure rules. Most important broker selection factor.
Resistance
Price level where selling pressure historically prevents further rises. Used for entry/exit decisions.
Risk/Reward Ratio (R/R)
Ratio of potential profit to potential loss. 1:2 R/R requires only 33% win rate to break even. Higher R/R = more mathematical margin.
RSI (Relative Strength Index)
Momentum indicator measuring speed and change of price movements. 0-100 scale. Above 70 = overbought; below 30 = oversold.
S
6 terms
Scalping
Strategy of taking many small profits from short-duration trades. Requires tight spreads and fast execution. Most affected by spread costs.
Slippage
Difference between expected and actual execution price. Compounding hidden cost. Worst during news events and low liquidity.
Spread
Difference between bid and ask prices. Primary cost in forex trading. Variable spreads change with market conditions; fixed spreads remain constant.
STP (Straight Through Processing)
Order execution model passing trades directly to liquidity providers. Similar to ECN. Different from market maker model.
Stop Loss
Pre-set order closing position at specific loss level. Essential risk management tool. Trading without stop losses is gambling.
Support
Price level where buying pressure historically prevents further falls. Opposite of resistance.
T
4 terms
Take Profit
Pre-set order closing position at specific profit target. Used with stop loss to define risk/reward before entry.
Technical Analysis
Analysis using price patterns and indicators. Most common retail approach. Different from fundamental analysis (economic data, company financials).
Trailing Stop
Stop loss that automatically moves in profitable direction. Locks in profits while letting winners run.
Trend
Sustained directional price movement. “Trend is your friend” — most strategies work better trading with prevailing trend.
V
2 terms
VIX (Volatility Index)
“Fear index” measuring expected market volatility. High VIX = market fear; low VIX = complacency.
Volatility
Magnitude of price movements. Higher volatility = larger potential moves both directions. Strategy choice should match current volatility regime.
W
2 terms
Win Rate
Percentage of profitable trades. High win rate alone doesn’t mean profitable — depends on risk/reward ratio. 70% win rate at 1:0.5 R/R is unprofitable.
Withdrawal
Process of transferring funds from broker account to personal account. Withdrawal reliability is the most important practical broker quality.