Forex terms, in plain English.

Account currency

The currency your trading account is held in. Profits, losses and margin are converted into it, which is why pip…

Algorithmic trading

Using computer programs to generate and execute trades from predefined rules.

Asian range

The high and low set during the quieter Asian session. Some strategies trade its breakout at the London open.

Ask

The price at which the market will sell to you, so it is the price you buy at. It is also called the offer.

Average daily range (ADR)

The average distance in pips between each day’s high and low over a period. It helps set realistic stops and targets.

Average Directional Index (ADX)

An indicator of trend strength, not direction. Readings above about 25 suggest a trending market.

Average True Range (ATR)

A volatility indicator that averages the true range, which includes any gap from the previous close, over a set…

B

Backtesting

Testing a strategy on historical data to see how it would have performed. Beware of fitting rules too closely to the…

Balance

Your account value from closed trades, deposits and withdrawals, not counting open positions.

Base currency

The first currency in a pair. In GBP/USD it is the pound. Buying the pair means buying the base currency.

Bid

The price at which the market will buy from you, so it is the price you sell at.

Black swan

A rare, unpredictable event with extreme market impact, such as the 2015 Swiss franc de-peg.

Bollinger Bands

Bands set two standard deviations above and below a moving average. They widen when volatility rises and narrow when…

Bond yields

The return on government bonds. Shifts in the gap between two countries’ yields often drive their exchange rate.

Break of structure (BOS)

When price breaks a prior swing high or low, signalling a trend continuation or a possible change in direction.

Breakeven

Moving the stop loss to the entry price so the trade can no longer lose money, apart from costs. It is often done…

Breakout

A move through support, resistance or a range boundary, often with a pickup in volatility.

Breakout trading

Entering as price breaks out of a range or pattern, expecting momentum to carry it further.

Broker

The firm that gives you access to the market, holds your funds and executes your orders. Choose one that is regulated…

Buy limit

A pending order to buy below the current price, used to enter on a pullback.

Buy stop

A pending order to buy above the current price, used to enter on an upside breakout.

C

Candlestick

A chart bar showing the open, high, low and close for a period. The body spans open to close and the wicks show the…

Carry trade

Buying a high-interest currency against a low-interest one to earn the positive swap. It is vulnerable to sharp…

Cent account

An account denominated in cents, so balances and lot values are 100 times smaller. It is useful for testing a…

Central bank

The institution that sets a country’s interest rates and monetary policy, such as the Federal Reserve, ECB or Bank of…

Channel

Two parallel trendlines containing price, rising, falling or flat.

Commission

A fixed fee per lot charged by some account types, usually alongside tighter raw spreads.

Commitment of Traders (COT)

A weekly CFTC report showing how futures traders are positioned. It is used to gauge sentiment in major currencies.

Commodity currencies

Currencies of countries that rely heavily on raw-material exports, such as the Australian dollar, Canadian dollar,…

Confluence

Several independent reasons pointing to the same level or trade, such as a Fibonacci level lining up with prior support.

Consumer Price Index (CPI)

The main measure of inflation. Higher-than-expected CPI tends to raise rate expectations and lift the currency.

Contract for difference (CFD)

A derivative that pays the difference in an asset’s price between opening and closing, without owning the asset. Many…

Contract size

The number of units in one lot of an instrument. For forex pairs a standard lot is 100,000 units of the base currency.

Copy trading

Automatically mirroring another trader’s positions in your own account. You still carry the full risk of every copied…

Correlation

A measure from −1 to +1 of how closely two pairs move together. Highly correlated positions can double your risk…

Cross pairs

Pairs of two major currencies that do not include the US dollar, such as EUR/GBP, GBP/JPY or AUD/NZD.

Cross rate

An exchange rate between two currencies calculated through a third, usually the US dollar. EUR/JPY can be derived…

Currency intervention

A central bank or government buying or selling its own currency to influence the exchange rate.

Currency pair

Two currencies quoted against each other, such as EUR/USD. The price shows how much of the second (quote) currency…

Currency peg

A policy that fixes or tightly manages a currency against another. Examples are the Hong Kong dollar against USD and…

Current account

A country’s trade balance plus income and transfers with the rest of the world.

D

Daily close

The end of the trading day, at 17:00 New York time for forex. Daily candles and swaps are based on it.

Day trading

Opening and closing trades within the same day, so no positions are held overnight and no swaps are paid.

Death cross

When a shorter moving average crosses below a longer one. It is read as a bearish signal.

Demo account

A practice account with virtual money. Use it to learn a platform and test position sizing before you risk real funds.

Divergence

When price and a momentum indicator disagree, for example price makes a higher high while RSI makes a lower high. It…

Doji

A candle whose open and close are almost equal, showing indecision.

Double bottom

Two lows at a similar level with a rally between. A break above the rally high suggests a reversal higher.

Double top

Two highs at a similar level with a dip between. A break below the dip suggests a reversal lower.

Dovish

Leaning towards lower interest rates to support growth. Dovish surprises usually weaken a currency.

Drawdown

The fall from an account’s peak to its lowest point before a new peak. A 50% drawdown needs a 100% gain to recover.

E

ECN broker

A broker that routes orders to an electronic network of liquidity providers. It typically offers raw spreads plus a…

Economic calendar

A schedule of upcoming data releases and central bank events, with expected and previous figures. Check it before…

Elliott Wave

A theory that markets move in a five-wave trend followed by a three-wave correction.

Engulfing pattern

A candle whose body completely covers the previous candle’s body in the opposite direction. It is a common reversal…

Entry zone

A price range rather than a single price within which a signal suggests opening the trade.

Equity

Your account balance plus or minus the floating profit or loss of open trades.

Equity curve

A chart of account value over time. A smooth, rising curve with shallow dips is the goal.

Exchange rate

The price of one currency in terms of another. In EUR/USD at 1.0850, one euro costs 1.0850 US dollars.

Execution

How and how quickly your orders are filled. Market execution fills at the available price, and instant execution may…

Exotic pairs

Pairs combining a major currency with one from a smaller or emerging economy, such as USD/ZAR or USD/MXN. Spreads are…

Expectancy

The average amount a strategy makes or loses per trade: (win rate × average win) − (loss rate × average loss).

Expert Advisor (EA)

An automated trading program that runs inside MetaTrader and opens or manages trades by itself.

Exponential moving average (EMA)

A moving average that weights recent prices more heavily, so it reacts faster than a simple moving average.

F

Fair value gap (FVG)

A three-candle imbalance where the middle candle moves so fast it leaves a gap between the wicks either side. Price…

False breakout

A move through a level that quickly reverses back inside. False breakouts are common in quiet sessions.

Fibonacci retracement

Levels at 23.6%, 38.2%, 50%, 61.8% and 78.6% of a prior swing, used to estimate where a pullback may pause.

Flag pattern

A short, tight counter-trend channel after a sharp move. It is usually a continuation pattern.

Flash crash

A sudden, very fast price collapse and rebound, usually in thin liquidity, that can blow through stop losses.

FOMC

The Federal Open Market Committee, the Federal Reserve body that sets US interest rates. It meets eight times a year.

Forex (FX)

Short for foreign exchange: the global over-the-counter market where currencies are bought and sold against each…

Forex signal

A trade idea with a pair, direction, entry, stop loss and take-profit levels, ideally with the reasoning behind it.

Forward guidance

What a central bank signals about future policy. Markets often react more to the guidance than to the decision itself.

Forward testing

Running a strategy in real time, on demo or small size, after backtesting to confirm it works on unseen data.

Free margin

Equity minus used margin. It is the amount available to open new positions or absorb losses.

Fundamental analysis

Forecasting currencies from economic data, interest rates, central bank policy and politics.

G

Gap

A jump between one price and the next with no trading in between, most often at the Sunday open after weekend news.

Golden cross

When a shorter moving average, often the 50, crosses above a longer one, often the 200. It is read as a bullish signal.

Good till cancelled (GTC)

An order instruction that keeps a pending order active until it fills or you cancel it.

Grid trading

Placing orders at regular intervals above and below price. Without stops it can build very large losing exposure.

Gross domestic product (GDP)

The total value of goods and services an economy produces. It is the broadest measure of growth.

H

Hawkish

Leaning towards higher interest rates to fight inflation. Hawkish surprises usually strengthen a currency.

Head and shoulders

A reversal pattern of three peaks with the middle one highest. The “neckline” through the lows is the trigger level.

Hedging

Opening a position to offset risk in another. Accidentally hedging with correlated pairs just costs you two spreads.

I

Ichimoku Cloud

A Japanese indicator system that shows trend, momentum and support or resistance through a shaded “cloud”.

Inflation

The rate at which prices rise. Central banks target it, usually at about 2%, mainly by adjusting interest rates.

Inside bar

A candle whose high and low sit within the previous candle’s range. It signals a pause, often before a breakout.

Interbank market

The network of large banks that trade currencies directly with one another. It sets the prices that brokers pass on…

Interest rate decision

A scheduled central bank announcement on its policy rate. It is one of the biggest volatility events for a currency.

Interest rate differential

The gap between two countries’ interest rates. Changes in expected differentials are one of the most powerful…

L

Leverage

Borrowed exposure that lets you control a position larger than your deposit. At 1:30, $1,000 of margin controls a…

Limit order

A pending order to buy below or sell above the current price. It fills only at your price or better.

Liquidity

How easily a currency can be bought or sold without moving the price. Liquidity is highest in the majors during the…

Liquidity provider

A bank or institution that streams prices and fills orders for brokers.

Liquidity sweep

A quick move beyond an obvious high or low that triggers stops before price reverses.

London open

The start of European trading, often bringing a burst of volume and the day’s first big move.

London session

European trading hours, roughly 08:00–17:00 London time, and the busiest single session.

Long

A buy position that profits if the price rises. Going long EUR/USD means buying euros and selling dollars.

Lot

A standardised position size. A standard lot is 100,000 units of the base currency, a mini lot 10,000, a micro lot…

M

MACD

Moving Average Convergence Divergence. It tracks the gap between two EMAs and a signal line to gauge momentum.

Major pairs

The seven most-traded pairs, each including the US dollar: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD and…

Margin

The deposit your broker sets aside to keep a leveraged position open. It equals the position value divided by the…

Margin call

A warning, or a block on new trades, when your margin level falls to the broker’s threshold, often 100%.

Margin level

Equity divided by used margin, as a percentage. Brokers use it to trigger margin calls and stop-outs.

Market maker

A broker or bank that quotes both a bid and an ask and takes the other side of client trades. It is also called a…

Market order

An order to buy or sell immediately at the best available price.

Market sentiment

The overall mood of traders towards a market or currency, whether bullish, bearish or cautious.

Market structure

The pattern of swing highs and lows: higher highs and higher lows in an uptrend, lower highs and lower lows in a…

Martingale

Doubling position size after each loss to recover it with one win. A long enough losing streak wipes out the account.

Maximum drawdown

The largest peak-to-trough decline recorded over a period. It is a key measure of how painful a strategy is to follow.

Mean reversion

The tendency of price to return towards an average after an extreme move. It is the basis of many range strategies.

MetaTrader 4 (MT4)

The most widely used retail forex trading platform, known for charting and automated Expert Advisors.

MetaTrader 5 (MT5)

The successor to MT4, with more timeframes, an economic calendar and support for more asset classes.

Micro lot

1,000 units of the base currency, shown as 0.01 lots and the smallest size at most brokers. On USD-quoted pairs one…

Mini lot

10,000 units of the base currency, shown as 0.10 lots. On USD-quoted pairs one pip is worth about $1.

Momentum

The speed and strength of a price move. Fading momentum can warn that a trend is tiring.

Monetary policy

How a central bank manages interest rates and the money supply to control inflation and support growth.

Moving average

The average price over a set number of periods, plotted as a line to smooth out noise and show trend direction.

Multi-timeframe analysis

Reading a higher timeframe for direction and a lower one for timing entries.

N

Nano lot

100 units of the base currency. Only some brokers offer it, usually on cent accounts.

Negative balance protection

A guarantee that you cannot lose more than your account balance. If a gap pushes the account below zero, the broker…

New York session

US trading hours, roughly 08:00–17:00 New York time, when most US data is released.

News trading

Trading around economic releases and central bank events. Spreads widen and slippage is common.

Non-farm payrolls (NFP)

The monthly US jobs report, usually released on the first Friday of the month at 08:30 New York time. It is one of…

O

One-cancels-the-other (OCO)

A pair of orders where filling one automatically cancels the other, for example a buy stop above a range and a sell…

Order block

A price zone, often the last opposite candle before a strong move, where traders believe large orders were placed. It…

Overbought

When momentum indicators suggest price has risen too far too fast. It is not a sell signal on its own.

Overleveraging

Opening positions too large for the account, so a normal move against you causes a heavy loss or a margin call.

Oversold

When momentum indicators suggest price has fallen too far too fast. It is not a buy signal on its own.

Overtrading

Taking too many trades or trading outside your plan, often out of boredom or to recover losses.

P

Parabolic SAR

A trend-following indicator that plots dots above or below price. Traders often use it to trail stops.

Partial close

Closing part of a position to bank profit while leaving the rest open, often at the first take-profit level.

Pending order

An order to open a trade automatically when price reaches a level you set. Limit and stop orders are pending orders.

Pin bar

A candle with a long wick and a small body, showing that price was rejected from a level.

Pip

The standard unit of price movement in forex. For most pairs a pip is 0.0001; for pairs quoted in Japanese yen it is…

Pip value

The money gained or lost when price moves one pip for a given position size. One standard lot of a USD-quoted pair is…

Pipette

A fractional pip, one tenth of a pip. It is the fifth decimal place on most pairs and the third on JPY pairs.

Pivot points

Support and resistance levels calculated from the previous period’s high, low and close. Many intraday traders watch…

Position sizing

Choosing how many lots to trade so that a stop-out costs a fixed amount of your account.

Position trading

Holding trades for weeks to months, based mainly on major trends and fundamentals.

Price action

Trading from the movement of price itself, such as candles, swings and levels, with few or no indicators.

Profit factor

Gross profit divided by gross loss. Above 1 a strategy is profitable, and many traders look for 1.5 or more.

Prop firm

A proprietary trading firm that lets traders who pass an evaluation trade its capital for a share of profits, under…

Psychological levels

Round numbers such as 1.1000 or 150.00 where many orders cluster and price often reacts.

Purchasing Managers’ Index (PMI)

A monthly survey of business conditions. Readings above 50 signal expansion and below 50 contraction.

Q

Quantitative easing (QE)

A central bank buying bonds to push down long-term interest rates and inject money. It tends to weaken the currency.

Quantitative tightening (QT)

Shrinking a central bank’s balance sheet by letting bonds mature or selling them. It is the reverse of QE.

Quote currency

The second currency in a pair, and the one the price is expressed in. Profit and loss on a trade is first calculated…

R

R-multiple

A result expressed as a multiple of the initial risk. A trade that risked $50 and made $100 is +2R.

Range

A sideways market bouncing between support and resistance without a clear trend.

Range trading

Buying near support and selling near resistance while a market moves sideways.

Raw spread account

An account type with spreads close to the interbank market plus a commission per lot. It is often cheaper overall for…

Regulated broker

A broker licensed and supervised by a financial regulator, which usually means segregated client funds, capital…

Relative Strength Index (RSI)

A momentum oscillator from 0 to 100. Readings above 70 are often called overbought and below 30 oversold.

Requote

When a broker rejects your requested price and offers a new one, common with dealing-desk execution in fast markets.

Resistance

A price area where selling has previously stopped a rally. Once broken, resistance often becomes support.

Retail sales

Monthly spending at shops and online. It is a read on consumer demand.

Retest

When price returns to a level it just broke, often to test old resistance as new support.

Revenge trading

Rushing into new trades to win back a loss. It usually means bigger size and worse setups.

Risk of ruin

The probability of losing so much of an account that recovery becomes impractical. It rises quickly with larger risk…

Risk per trade

The share of your account you lose if a trade hits its stop loss. Many traders use 0.5–2%.

Risk-off

A defensive market mood in which money tends to flow into safe-haven currencies such as USD, JPY and CHF.

Risk-on

A market mood in which investors favour higher-yielding and commodity currencies such as AUD and NZD over safe havens.

Risk:reward ratio

The potential loss compared with the potential gain. Risking 30 pips to make 60 is 1:2.

Rollover

The daily moment, 17:00 New York time, when open positions roll to the next value date and swaps are applied. Spreads…

S

Safe-haven currency

A currency that tends to hold up or strengthen in market stress. The US dollar, Japanese yen and Swiss franc are the…

Scaling in

Adding to a position in stages rather than all at once. Total risk across all entries should still respect your plan.

Scalping

A very short-term style that aims for small gains of a few pips, holding trades for seconds to minutes. Spreads and…

Seasonality

A tendency for a market to behave in a certain way at certain times of year. It is a statistical tendency, never a…

Sell limit

A pending order to sell above the current price, used to enter on a rally into resistance.

Sell stop

A pending order to sell below the current price, used to enter on a downside breakout.

Session overlap

When two major sessions are open at once. The London–New York overlap is the most liquid and often the most volatile…

Short

A sell position that profits if the price falls. Going short GBP/JPY means selling pounds and buying yen.

Signal provider

A person or service that publishes trade ideas for others to follow. Look for complete signals with stops and an…

Simple moving average (SMA)

The plain average of closing prices over a set number of periods.

Slippage

The difference between the price you expected and the price you got. It is common in fast markets and around news.

Spot forex

Currency trading for immediate delivery, which in practice settles two business days later. Retail traders roll…

Spread

The difference between the bid and ask price, and the main cost of a trade. It is usually measured in pips.

Standard lot

100,000 units of the base currency, shown as 1.00 in most trading platforms. On USD-quoted pairs one pip is worth…

Stochastic oscillator

A momentum indicator comparing the close with the recent high-low range, on a scale from 0 to 100.

Stop loss

An order that closes a trade at a set price to cap the loss. It marks the point where the trade idea is proven wrong.

Stop order

A pending order to buy above or sell below the current price. It is typically used to enter on a breakout.

Stop-limit order

A pending order that becomes a limit order once a stop price is touched, giving control over the fill price at the…

Stop-out

The margin level at which a broker starts closing your positions automatically to stop further losses, often 50% or…

Straight-through processing (STP)

An execution model in which the broker passes orders on to liquidity providers rather than taking the other side itself.

Supply and demand zones

Areas where price previously turned sharply, suggesting unfilled selling (supply) or buying (demand).

Support

A price area where buying has previously stopped a decline. Once broken, support often becomes resistance.

Swap (rollover)

Interest paid or earned for holding a position overnight. It reflects the interest-rate gap between the two currencies.

Swap-free account

An account that does not charge or pay overnight interest, often offered as an Islamic account. Brokers may charge a…

Swing trading

Holding trades for days to weeks to capture larger moves, with wider stops and smaller position sizes.

Sydney session

The first session of the trading week, roughly 07:00–16:00 Sydney time. It is usually quiet.

T

Take profit

An order that closes a trade at a set price to lock in profit. Signals often give two or three take-profit levels.

Forecasting price moves from charts, patterns and indicators rather than economic data.

Tick

The smallest recorded price change, or a single price update. A tick chart draws a new bar after a set number of…

Timeframe

The period each candle represents, from one minute (M1) to one month (MN). Higher timeframes show the bigger picture.

Tokyo session

Asian trading hours, roughly 09:00–18:00 Tokyo time. JPY, AUD and NZD pairs are most active.

Trade balance

Exports minus imports. Persistent surpluses or deficits can influence a currency over time.

Trade copier

Software that copies trades from one account or signal source into another, usually scaled to the receiving account’s…

Trade management

What happens after entry: taking partial profit, moving the stop to breakeven or trailing it.

Trading journal

A record of every trade with the reasons, screenshots and outcome. It is the main tool for finding and fixing mistakes.

Trading plan

Written rules for what you trade, when, how you enter and exit, and how much you risk. It removes in-the-moment…

Trading session

The active hours of a major financial centre. Forex is usually split into the Sydney, Tokyo, London and New York…

TradingView

A popular web-based charting platform. Many traders analyse there and execute through a connected broker.

Trailing stop

A stop loss that follows price by a set distance as the trade moves in your favour, locking in more profit while…

Trend

A sustained directional move: higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend.

Trend following

Trading in the direction of the prevailing trend and staying in while it lasts.

Trendline

A line connecting swing lows in an uptrend or swing highs in a downtrend, used as dynamic support or resistance.

Triangle pattern

Converging trendlines (ascending, descending or symmetrical) showing contracting volatility before a breakout.

U

Unemployment rate

The share of the labour force without a job. It is a key input for central bank decisions.

US Dollar Index (DXY)

An index of the US dollar against six major currencies, dominated by the euro. It is a quick gauge of broad dollar…

V

Verified track record

Trading results confirmed by a third party or published trade by trade in advance, including losses. It is the best…

VIP signals group

A paid tier offered by many Telegram signal channels. Be wary of private messages pushing upgrades or deposits.

Volatility

How much and how quickly price moves. In forex it is often measured by the average daily range in pips or the ATR.

Volume

The amount traded. Spot forex has no central exchange, so platforms usually show tick volume, the number of price…

W

Wedge

A pattern of converging trendlines that slope the same way. Rising wedges often break down and falling wedges often…

Win rate

The percentage of trades that close in profit. On its own it says little. A 40% win rate can be very profitable with…

Y