Reference

Trading Glossary

Plain-English definitions of the 34 terms that come up most often across forex, crypto, commodities and stock market trading.

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ATR (Average True Range): ATR is an indicator that measures average price range over a set number of periods, giving a volatility figure in price units.

Breakout: A breakout is a move of price beyond an established support, resistance or consolidation boundary, often with rising volume.
Bitcoin Halving: The Bitcoin halving is a protocol event, roughly every four years, that cuts the block reward paid to miners by 50%.
Bitcoin: Bitcoin is the first decentralised cryptocurrency, a peer-to-peer digital asset secured by proof-of-work mining with a fixed 21 million supply cap.

CFD (Contract for Difference): A CFD is a derivative contract that pays the difference between an instrument's opening and closing price without transferring ownership of the asset.
Cryptocurrency: A cryptocurrency is a digital asset that uses cryptography and a distributed ledger to record ownership without a central authority.

Drawdown: Drawdown is the peak-to-trough decline in account equity, expressed as a percentage of the previous high.

Equity: Equity is an account's balance plus or minus the floating profit and loss of all open positions.
ETF (Exchange-Traded Fund): An ETF is a pooled investment fund that holds a basket of assets and trades on an exchange like a single share.
Expense Ratio: The expense ratio is the annual percentage of assets a fund charges to cover management and operating costs.

Fundamental Analysis: Fundamental analysis values an asset from economic, financial and policy data rather than from its price history.

Index Fund: An index fund is a fund that aims to replicate the composition and return of a market index rather than to beat it.
Interest Rate: An interest rate is the cost of borrowing money, with the central-bank policy rate anchoring the rest of an economy's rates.
Inflation: Inflation is the rate at which the general price level rises, most commonly measured by the Consumer Price Index (CPI).

Leverage: Leverage lets a trader control a position larger than their account balance, expressed as a ratio such as 1:30 or 1:500.
Lot: A lot is the standardised trade size in forex: a standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.
Liquidity: Liquidity is how easily an asset can be bought or sold in size without materially moving its price.

Margin: Margin is the deposit a broker requires you to set aside to open and maintain a leveraged position.
Margin Call: A margin call is a broker warning that account equity has fallen too close to the margin required to keep open positions.
MACD: MACD is a trend and momentum indicator built from the difference between two exponential moving averages, usually the 12- and 26-period.
Moving Average: A moving average smooths price by averaging it over a set number of periods, revealing trend direction with a lag.

Pip: A pip is the smallest standard price move in a currency pair, equal to 0.0001 for most pairs and 0.01 for yen pairs.
Position Sizing: Position sizing is the calculation that converts a chosen risk amount and stop-loss distance into the correct trade size.

Risk-Reward Ratio: The risk-reward ratio compares the distance to a trade's stop-loss with the distance to its profit target.
RSI (Relative Strength Index): RSI is a momentum oscillator scaled 0-100 that compares the size of recent gains to recent losses, typically over 14 periods.

Spread: The spread is the difference between the bid and ask price of an instrument, and it is the main trading cost on most forex and CFD accounts.
Stop-Loss: A stop-loss is a resting order that closes a position automatically once price reaches a predefined level, capping the loss on that trade.
Slippage: Slippage is the difference between the price a trader expects on an order and the price at which it actually fills.
Support and Resistance: Support is a price area where buying has previously halted declines; resistance is where selling has previously halted advances.
Swap (Rollover): A swap is the interest credited or debited when a leveraged position is held past the daily rollover, reflecting the interest-rate difference between the two currencies.
Stock Market: The stock market is the network of exchanges and venues where shares in publicly listed companies are issued and traded.

Take-Profit: A take-profit is a resting order that closes a position automatically once price reaches a predefined profit target.
Technical Analysis: Technical analysis is the study of historical price and volume data to forecast likely future price behaviour.

Volatility: Volatility measures how much and how quickly an asset's price moves, usually as the standard deviation of returns.