Trading Terms Glossary

The price at which a seller is willing to sell a currency pair. Also known as the offer price. The ask is always higher than the bid.

The first currency in a currency pair. For example, in EUR/USD, the Euro is the base currency. It represents the value of one unit of the base currency in terms of the quote currency.

A market condition characterised by falling prices and pessimistic sentiment. Traders expect prices to continue declining and may take short positions.

The price at which a buyer is willing to buy a currency pair. The bid is always lower than the ask. The difference between bid and ask is the spread.

A financial intermediary that facilitates buying and selling of financial instruments between traders and liquidity providers. TradeCircle is your trusted forex broker.

A market condition characterised by rising prices and optimistic sentiment. Traders expect prices to continue rising and may take long positions.

Contract for Difference. A derivative product that allows you to trade on the price movement of an asset without owning the underlying instrument. You profit from price differences between entry and exit.

A colloquial term for small positions or profits. Often used when traders close small winning positions to lock in gains.

The final price at which a financial instrument trades during a trading session. Used for calculating daily profit and loss and marking positions to market.

A fee charged by the broker for executing a trade. Some accounts charge fixed commissions per lot, while others use spread-only pricing with no additional commission.

A currency pair that does not include the US Dollar. For example, EUR/GBP or AUD/JPY. Cross rates are derived from the exchange rates of each currency against the USD.

Two currencies quoted together in a forex trade. The value of one currency is expressed relative to the other. Example: EUR/USD = 1.0850 means 1 Euro equals 1.0850 US Dollars.

Opening and closing positions within the same trading day. Day traders aim to profit from short-term price movements and avoid overnight holding costs.

A practice account with virtual funds that simulates real market conditions. Ideal for beginners to learn trading without risking real money. TradeCircle offers free unlimited demo accounts.

The decline from a peak in account equity to a subsequent trough. Measured as a percentage. A 50% drawdown means the account has lost half its peak value.

The total value of a trading account, calculated as balance plus or minus unrealised profit and loss from open positions. Equity represents the true worth of your account at any moment.

A currency pair consisting of one major currency and one currency from an emerging or smaller economy. Examples include USD/TRY, EUR/ZAR, and USD/SEK. Exotic pairs typically have wider spreads.

A method of evaluating assets by analysing economic indicators, interest rates, political events, and other macroeconomic factors that influence supply and demand.

An area on a chart where no trading has occurred, appearing as an empty space between candles. Gaps typically occur over weekends or after major news events when the market reopens at a different price.

An investment strategy used to offset potential losses in one position by taking an opposite position in a related asset. Hedging reduces overall portfolio risk.

Using borrowed capital to increase the potential return of an investment. With 1:100 leverage, a $1,000 deposit controls $100,000 worth of currency. Leverage magnifies both profits and losses.

An order to buy or sell at a specific price or better. A buy limit order executes at the specified price or lower. A sell limit order executes at the specified price or higher.

The ability to buy or sell an asset quickly without significantly affecting its price. High liquidity means tight spreads and fast execution. Major forex pairs have the highest liquidity.

A standard unit of measurement in forex trading. A standard lot is 100,000 units of the base currency. A mini lot is 10,000 units and a micro lot is 1,000 units.

A currency pair that includes the US Dollar paired with another major currency. The eight major pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, NZD/USD, and USD/SGD.

The amount of funds required in your account to open and maintain a position. Margin is a good faith deposit, not a fee. With 1% margin, you control positions worth 100x your margin.

A broker warning that your account equity has fallen below the required margin level. If not addressed by depositing more funds or closing positions, the broker may auto-close positions.

An active trade that has not been closed. An open position can be either long (buy) or short (sell) and is subject to market price fluctuations until closed.

A cost or credit applied to positions held open past the daily market close (5 PM EST). Also known as swap or rollover. The charge reflects interest rate differentials between the two currencies.

Price Interest Point. The smallest standard price movement in a currency pair. For most pairs, a pip is 0.0001 (the fourth decimal place). For JPY pairs, a pip is 0.01 (the second decimal place).

The monetary value of a one-pip movement in a currency pair. For a standard lot in EUR/USD, one pip equals $10. Pip value depends on the lot size and the currency pair traded.

A trading strategy that involves making numerous small trades to profit from minor price changes. Scalpers typically hold positions for seconds to minutes and target small profit margins.

The difference between the bid and ask price of a currency pair. The spread represents the broker's commission and is measured in pips. Tight spreads mean lower trading costs.

An order placed to automatically close a position at a predetermined price to limit potential losses. Essential for risk management. Once triggered, the position is closed at market price.

An order placed to automatically close a position when it reaches a specified profit target. Ensures profits are locked in without the need to manually monitor the trade.

A method of evaluating assets by analysing statistical trends from trading activity, including price movement and volume. Traders use charts, indicators, and patterns to forecast future price movements.

A dynamic stop loss that moves with the market price in your favour. If the price moves 50 pips in your favour, a 20-pip trailing stop would move 30 pips in your favour, locking in profits.

A statistical measure of the dispersion of returns for a given security or market index. High volatility means large price swings and potentially higher profit opportunities, but also higher risk.

The total number of shares, contracts, or lots traded in a security or market during a given period. Volume is used to confirm trends and identify reversal points.

The income return on an investment, expressed as a percentage. In forex, yield refers to the interest earned from holding a currency position, influenced by the interest rate differential.