Glossary

The lowest price a seller is currently willing to accept. Also called the offer. A buyer who wants to trade immediately pays the ask.

If the ask is 1.1002, an immediate buy is quoted there, not at the last traded price.

The highest price a buyer is currently willing to pay. A seller who wants to trade immediately sells at the bid.

If the bid is 1.1000 and the ask is 1.1002, an immediate sell is quoted at 1.1000.

A drawing of the open, high, low, and close of one slice of time. The body joins open and close. The wicks reach the high and the low.

A daily candle summarizes every trade in that session into four numbers.

The decline from a peak in an account or a practice curve down to a later trough, before a new peak. It is how you measure a rough patch, not a single losing trade.

An account that rises from 1,000 to 1,200 and then falls to 1,080 has a drawdown of 120 from the peak.

Using a smaller deposit to control a larger position. It magnifies both gains and losses. A small move against you can erase the cash you posted.

With high leverage, a move that looks tiny on the chart can be a large percentage of the money you set aside.

How easily a position can be traded near the current price without moving that price. More willing buyers and sellers usually means tighter spreads and calmer fills.

A major currency pair during London hours is usually more liquid than a quiet contract on a holiday.

A standard bundle of units in a market. The bundle size depends on the product. A mini or micro lot is a smaller bundle of the same thing.

In many spot currency quotes, one standard lot is 100,000 units of the base currency. Always read your broker's specification.

The deposit a broker sets aside to keep a leveraged position open. It is not a fee. If the position moves against you far enough, the broker can ask for more or close the trade.

A position that requires 200 of margin is still exposed to the full size of the position, not only to 200.

A standard small step in a quoted price. In many currency pairs it is the fourth decimal place, 0.0001. Pairs quoted in yen often use the second decimal place.

A move from 1.1000 to 1.1010 is 10 pips if a pip is 0.0001.

A comparison of the distance to invalidation and the distance to the area where you would take a gain. It describes the plan. It does not predict the outcome.

Risking 20 pips to a stop with a target 40 pips away is a 1:2 plan, before spread and slippage.

The gap between the bid and the ask. It is a cost of crossing the market immediately, and it widens when liquidity thins.

Bid 1.1000 and ask 1.1002 is a 2-pip spread on that quote.

An order that closes a position if price reaches a chosen level. It is how a trader pre-commits to the place where the idea is wrong. Fills can be worse than that level in a fast market.

A long practice trade entered at 100 with a stop at 98 is admitting the idea is wrong at 98.

A sequence of swings in one direction. An uptrend is rising swing highs and rising swing lows. A downtrend is the mirror. A mix is a range.

Three higher lows in a row are a description of demand stepping up, not a promise it continues.

How widely price is moving. High volatility means larger, faster trips. It is not the same thing as a trend, and it makes spreads, slippage, and position size matter more.

A market that usually travels 40 pips a day and suddenly travels 120 is in a more volatile regime.