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Glossary

Ask

The price at which you can buy an instrument.

Base currency

The first currency in a currency pair, e.g. EUR in EUR/USD.

Bid

The price at which you can sell an instrument.

CFD

Contract for difference — an agreement to exchange the difference in an asset’s price between opening and closing a trade, without owning the asset.

Leverage

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

Lot

A standardised trade size. One standard lot in forex is usually 100,000 units of the base currency.

Margin

The amount of money needed in your account to open and keep a leveraged position.

Margin call

A warning that your account equity has fallen close to the level needed to keep positions open.

Pip

A standard unit of price movement in a currency pair — usually the fourth decimal place (0.0001), or the second (0.01) for pairs quoted in Japanese yen.

Quote currency

The second currency in a currency pair, in which the price is expressed, e.g. USD in EUR/USD.

Slippage

The difference between the expected price of an order and the price at which it is actually executed.

Spread

The difference between the bid and ask prices.

Stop loss

An order that closes a position automatically at a set price to limit a loss.

Swap

An overnight financing charge or credit applied to positions held open past the daily rollover time.

Take profit

An order that closes a position automatically when a set profit level is reached.

Volatility

How much and how quickly an instrument’s price changes over time.