Dynamic Dictionary

Interactive Trading Concepts

Arbitrage

A strategy that takes advantage of price differences in different markets or brokers. Traders buy low in one market and sell high in another simultaneously.

Bid PriceThe price at which you can sell a currency pair. It is always lower than the Ask price.

Breakout

When price moves beyond a previously established support or resistance level, often with increased volume.

Candlestick ChartA type of price chart that displays open, high, low, and close prices for each period. Each candlestick shows market sentiment.

Correlation

A statistical measure of how two currency pairs move in relation to each other. Can be positive (move together) or negative (move opposite).

Leverage

The use of borrowed capital to increase the potential return of an investment. Example: 1:100 leverage means for every $1 you have, you can control $100.

Lot

A standardized quantity of the instrument you are trading. Use the calculator below to determine the right lot size based on your risk.

Margin CallA notification from your broker that your account equity has fallen below the required margin level. You may need to deposit more funds or close positions.

Pip

"Percentage in Point". Usually the 4th decimal place in a currency quote. A move from 1.1000 to 1.1001 is 1 pip. For JPY pairs, it's the 2nd decimal place.

RSI (Relative Strength Index)

A momentum oscillator that measures the speed and change of price movements. Ranges from 0 to 100. Above 70 = overbought, below 30 = oversold.

Slippage

The difference between the expected price and the actual execution price. Common during high volatility or low liquidity.

Spread

The difference between the Bid and Ask price. This is the cost of the trade. Measured in pips.

Stop Loss (SL) & Take Profit (TP)

Essential risk management tools. Stop Loss limits your losses, Take Profit locks in your gains. Always use both!

Support & Resistance

Key price levels where the market tends to reverse. Support prevents price from falling, resistance prevents price from rising.

Volatility

A measure of how much the price of an asset moves over time. High volatility means big price swings, low volatility means small movements.

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A-Z Trading Terminology

A

Ask Price

The price at which you can buy a currency pair. It is always higher than the Bid price. Also known as the "offer price."

Asian Session

The trading session when Tokyo markets are open (00:00-09:00 GMT). Typically has lower volatility and wider spreads compared to London/NY sessions.

At-the-Money (ATM)

An option or position where the current market price equals the strike price. Neither in profit nor loss.

B

Base Currency

The first currency in a currency pair (e.g., EUR in EUR/USD). The base currency is what you are buying or selling.

Bear Market

A market condition characterized by falling prices and pessimistic sentiment. Opposite of a bull market.

Bearish

A belief that the market will go down. A bearish trader expects prices to fall.

Bid PriceThe price at which you can sell a currency pair. It is always lower than the Ask price.

Bollinger BandsA technical indicator consisting of three lines: a moving average and two standard deviation bands. Used to identify volatility and potential reversal points.

Breakout

When price moves beyond a previously established support or resistance level, often with increased volume.

Broker

An intermediary that connects traders to the forex market. Brokers provide trading platforms and execute trades on behalf of clients.

Bull MarketA market condition characterized by rising prices and optimistic sentiment. Opposite of a bear market.

Bullish

A belief that the market will go up. A bullish trader expects prices to rise.

Buy Limit OrderAn order to buy at a price below the current market price. Executes when price falls to your specified level.

Buy Stop OrderAn order to buy at a price above the current market price. Often used to enter a trade when price breaks resistance.

C

Cable

Slang term for the GBP/USD currency pair. Originated from the transatlantic cable used to transmit prices in the 1800s.

Candlestick ChartA type of price chart that displays open, high, low, and close prices for each period. Each candlestick shows market sentiment.

Central BankA national bank that manages a country's currency and monetary policy. Examples: Federal Reserve (US), European Central Bank (EU), Bank of England (UK).

CFD (Contract for Difference)A derivative product that allows you to speculate on price movements without owning the underlying asset.

Commission

A fee charged by a broker for executing a trade. Common in ECN accounts where spreads are minimal.

Correlation

A statistical measure of how two currency pairs move in relation to each other. Can be positive (move together) or negative (move opposite).

Currency PairThe quotation of two different currencies, where one is quoted against the other. Example: EUR/USD.

D

Day TradingA trading style where positions are opened and closed within the same trading day. No positions held overnight.

Demo AccountA practice trading account with virtual money. Allows traders to test strategies without risking real capital.

Depth of Market (DOM)A display showing buy and sell orders at different price levels. Also called the "order book."

Divergence

When price makes a new high/low but an indicator doesn't. Often signals a potential reversal.

Drawdown

The reduction in account capital from a series of losing trades. Measured from peak to trough.

DXY (Dollar Index)A measure of the US dollar's value against a basket of six major currencies (EUR, JPY, GBP, CAD, SEK, CHF).

E

ECN (Electronic Communication Network)A type of broker that connects you directly to liquidity providers without taking the other side of your trade. Typically offers tighter spreads.

Economic CalendarA schedule of upcoming economic events and data releases that can impact currency prices. Examples: GDP, employment data, interest rate decisions.

Equity

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

Exchange RateThe price at which one currency can be exchanged for another.

Expert Advisor (EA)An automated trading program (robot) that executes trades based on predefined rules. Used in MetaTrader platforms.

F

Fibonacci RetracementA technical analysis tool using horizontal lines to indicate potential support/resistance levels based on Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%).

Fill

The execution of an order. When your order is "filled," it means it has been completed at the specified price.

Flat

Having no open positions. Also called "square."

Forex (FX)Short for "Foreign Exchange." The global marketplace for trading currencies.

Forward

A contract to buy or sell a currency at a predetermined price on a future date.

Fundamental AnalysisAnalyzing economic, political, and social factors to predict currency price movements. Opposite of technical analysis.

G

Gap

A price jump where no trading occurred. Common after weekends or major news events.

Going LongBuying a currency pair with the expectation that it will rise in value.

Going ShortSelling a currency pair with the expectation that it will fall in value. Also called "shorting."

Gold (XAU)

The precious metal often traded as XAU/USD. Considered a safe-haven asset.

H

Hedging

Opening a position to offset the risk of another position. Used to protect against adverse price movements.

High-Frequency Trading (HFT)A trading strategy using powerful computers to execute a large number of orders in fractions of a second.

I

Indicator

A mathematical calculation based on price and/or volume, displayed as a line on a chart. Examples: RSI, MACD, Moving Averages.

Initial MarginThe minimum amount of money required to open a position. Set by the broker based on leverage.

Interest RateThe cost of borrowing money, set by central banks. Higher rates typically strengthen a currency.

J

JPY (Japanese Yen)

The currency of Japan. Often used in carry trades due to historically low interest rates.

K

Kiwi

Slang term for the NZD/USD currency pair, named after New Zealand's national bird.

L

Limit OrderAn order to buy or sell at a specific price or better. Will only execute if price reaches your level.

Liquidity

The ease with which an asset can be bought or sold without affecting its price. Major pairs like EUR/USD have high liquidity.

London SessionThe trading session when London markets are open (08:00-17:00 GMT). Typically the most volatile session with highest volume.

Long Position

A position where you have bought a currency pair, expecting it to rise. Opposite of short position.

Lot

A standardized quantity of the instrument you are trading.

• Standard Lot: 100,000 units ($10 per pip on EUR/USD)
• Mini Lot: 10,000 units ($1 per pip)
• Micro Lot: 1,000 units ($0.10 per pip)

M

MACD (Moving Average Convergence Divergence)A trend-following momentum indicator that shows the relationship between two moving averages of a price.

Margin

The money required in your account to open and maintain a position. Acts as collateral.

Margin CallA notification from your broker that your account equity has fallen below the required margin level. You may need to deposit more funds or close positions.

Market HoursThe times when forex markets are open. Forex trades 24 hours a day, 5 days a week, across different time zones.

Market MakerA broker that takes the other side of your trade. They profit when you lose. Opposite of ECN broker.

Market OrderAn order to buy or sell immediately at the current market price. Also called "at market."

Moving Average (MA)An indicator that smooths out price action by averaging prices over a specific period. Used to identify trends.

N

News TradingA strategy based on trading around major economic news releases. High risk due to volatility spikes.

NY Session (New York Session)The trading session when New York markets are open (13:00-22:00 GMT). High liquidity, especially during overlap with London.

O

Order

An instruction to buy or sell a currency pair. Can be executed immediately (market order) or at a specific price (limit/stop order).

Overbought

A condition where price has risen too far and too fast. Often identified by indicators like RSI above 70. May signal a potential reversal down.

Oversold

A condition where price has fallen too far and too fast. Often identified by indicators like RSI below 30. May signal a potential reversal up.

P

Pip

"Percentage in Point". Usually the 4th decimal place in a currency quote. A move from 1.1000 to 1.1001 is 1 pip. For JPY pairs, it's the 2nd decimal place.

Position

An open trade. You have a position when you've bought or sold a currency pair and haven't closed it yet.

Position SizeThe number of lots you trade. Determines how much money you make or lose per pip movement.

Profit TargetA predetermined price level where you plan to close a profitable trade. Also called "Take Profit" (TP).

Q

Quote CurrencyThe second currency in a currency pair (e.g., USD in EUR/USD). Also called the "counter currency."

R

Range

A market condition where price moves between a support level and a resistance level without breaking out.

Requote

When a broker cannot execute your order at the requested price and offers a different (usually worse) price. Common with market makers.

Resistance

A price level where selling pressure is strong enough to prevent price from rising further. Opposite of support.

Risk ManagementThe practice of managing trading risk through position sizing, stop losses, and proper money management.

Risk/Reward Ratio (R:R)The ratio of potential profit to potential loss on a trade. Example: Risking $100 to make $200 is a 1:2 R:R ratio.

RSI (Relative Strength Index)

A momentum oscillator that measures the speed and change of price movements. Ranges from 0 to 100. Above 70 = overbought, below 30 = oversold.

S

Scalping

A trading style that aims to profit from small price movements. Positions are held for seconds to minutes.

Sell Limit OrderAn order to sell at a price above the current market price. Executes when price rises to your specified level.

Sell Stop OrderAn order to sell at a price below the current market price. Often used to enter a short trade when price breaks support.

Short PositionA position where you have sold a currency pair, expecting it to fall. Opposite of long position.

Slippage

The difference between the expected price and the actual execution price. Common during high volatility or low liquidity.

STP (Straight Through Processing)A broker model that passes your orders directly to liquidity providers without intervention. Similar to ECN.

Stop Loss (SL)A predetermined price level where you automatically close a losing trade to limit losses. Essential risk management tool.

Support

A price level where buying pressure is strong enough to prevent price from falling further. Opposite of resistance.

Swap

Interest paid or earned for holding a position overnight. Also called "rollover" or "overnight fee." Can be positive or negative.

Swing TradingA trading style where positions are held for days to weeks, aiming to capture larger price movements.

T

Take Profit (TP)A predetermined price level where you automatically close a profitable trade to lock in gains. Also called "profit target."

Technical AnalysisForecasting future price movements based on past price movements, chart patterns, and technical indicators. Opposite of fundamental analysis.

Trend

The general direction of price movement. Can be uptrend (higher highs and lows), downtrend (lower highs and lows), or sideways.

Trendline

A line drawn on a chart connecting price highs or lows. Used to identify trend direction and potential reversal points.

U

Unrealized P/LProfit or loss on open positions that hasn't been closed yet. Becomes "realized" when you close the position.

Uptrend

A market condition where price makes higher highs and higher lows. Indicates bullish sentiment.

V

Volume

The number of contracts or lots traded in a given period. Higher volume often indicates stronger price movements.

W

Whipsaw

A market condition where price moves in one direction, then quickly reverses, causing losses for traders on both sides.

X

XAU/USD

The symbol for trading gold against the US dollar. XAU is the chemical symbol for gold.

Y

Yield

The return on an investment, often expressed as a percentage. In forex, related to interest rate differentials between currencies.

Z

Zero-Sum GameA concept where one trader's profit equals another trader's loss. In forex, when you win, someone else loses (excluding broker fees).