Glossary

Forex terms, explained simply

A plain-English reference to the words you'll meet in every trading session.

Base & quote currency

In EUR/USD, EUR is the base currency and USD is the quote currency. The price shows how much quote currency one unit of base buys.

The bid is the price at which the market will buy from you; the ask is the price at which it will sell to you.

The peak-to-trough decline in account equity, usually shown as a percentage. A key measure of risk and consistency.

An index measuring the US dollar against a basket of major currencies; a common gauge of broad dollar strength.

Pairs that combine a major currency with a smaller or emerging-market currency. They are less liquid and more volatile.

Borrowed capital that lets you control a larger position with a smaller deposit. It magnifies both gains and losses.

How easily an asset can be bought or sold without moving its price. Major pairs are highly liquid.

The volume of a trade. A standard lot is 100,000 units of the base currency; mini and micro lots are 10,000 and 1,000 units.

The most traded currency pairs that include the US dollar, such as EUR/USD, GBP/USD, USD/JPY.

The deposit required to open and maintain a leveraged position. It is a portion of the full trade value held by your broker.

The smallest standard price move in a currency pair, usually the fourth decimal place (0.0001). For JPY pairs it is the second decimal place.

The ratio between the amount risked and the potential reward on a trade, e.g. risking 1 to make 2 is a 1:2 R:R.

The difference between the expected price of a trade and the price at which it actually executes, common in fast markets.

The difference between the bid (sell) and ask (buy) price. It is effectively the cost of entering a trade.

A preset order that closes a losing trade at a defined price to cap the loss. A core risk-management tool.

Areas on a chart where buying or selling pressure previously overwhelmed the other side, often producing sharp moves.

Price levels where a market has historically stalled or reversed — support below price, resistance above.

The interest paid or earned for holding a leveraged position overnight, based on the interest-rate difference between the two currencies.

A preset order that closes a trade once it reaches a target price, locking in a gain.

The rate and size of price movement. Higher volatility means larger swings and higher risk.