Forex Glossary: Key Trading Terms Defined
Forex, CFDs and copy trading come with a lot of jargon. This glossary explains the terms you're most likely to meet, in plain English. Each entry is short. Where we have a fuller guide, the entry links to it.
Trading forex and CFDs is high risk and you can lose all the money you put in. Most retail CFD accounts lose money. This article is general education, not financial advice.
How to use this glossary
The main A–Z list covers general trading terms. After it come three short sections that group terms by topic: copy trading and copiers, risk, and regulation. If you're starting from scratch, Forex trading explained is a good first read.
How some of these terms apply to us. Our own strategy is an automated grid on AUDCAD in which later trades can be larger, a martingale-style approach. Everything in this glossary about grids, martingale and averaging down applies to it. Read our full risk warning.
A–Z
Absolute gain. A way of showing an account's return that compares the money made or lost with the money deposited, without adjusting for the timing of deposits and withdrawals. It can differ a lot from other "gain" measures for the same account. See MyFXBook gain vs absolute gain.
Ask price. The price at which you can buy. It's the higher of the two prices quoted.
Averaging down. Adding to a losing position at a lower price, so the average entry price moves closer to the current price. It means price needs to recover less to break even, but the total position, and the potential loss, gets bigger. See Averaging down and risk of ruin.
Balance. The money in a trading account from deposits, withdrawals and closed trades. It doesn't include trades that are still open. See Equity vs balance.
Base currency. The first currency in a pair. In EUR/USD, the euro is the base currency.
Basket. A group of open trades that a strategy manages and closes together, common in grid strategies.
Bid price. The price at which you can sell. It's the lower of the two prices quoted.
Broker. The firm that gives you access to the market and holds your trading account. Check exactly which company your account is with and how it's regulated.
CFD (contract for difference). A contract to exchange the difference in price of something between when you open and close the trade. You don't own the underlying asset. CFDs are leveraged and high-risk.
Close-out. When a broker closes your positions, for example because your account no longer has enough margin. See Stop out.
Commission. A fee charged per trade by some brokers or account types, in addition to the spread.
Contract size. How much of an instrument one lot represents at a particular broker. For most currency pairs, 1 standard lot is 100,000 units of the base currency, but contract sizes can differ between instruments and brokers.
Currency pair. Two currencies quoted against each other, such as EUR/USD or GBP/JPY. The price shows how much of the second currency one unit of the first is worth.
Drawdown. The fall from a peak in an account's value to a later low, often shown as a percentage. A strategy's largest drawdown so far is not a limit: a future drawdown can be deeper, up to the loss of all the money in the account. See What is drawdown in trading?
Equity. The account balance plus or minus the profit or loss on open trades. It's roughly what the account would be worth if everything were closed now, and it's what brokers use for margin calls and stop outs.
Exchange rate. The price of one currency in terms of another.
Expert Advisor (EA). A program that runs inside MetaTrader and can trade automatically according to its rules. See What is an Expert Advisor in MT5?
Exposure. The full size of a position, as opposed to the margin put down for it. Profits and losses are calculated on the exposure.
Floating profit or loss. The profit or loss on a trade that's still open. It changes with every price move and becomes realised when the trade closes. Floating losses already reduce your equity.
Forex (FX). The foreign exchange market, where currencies are traded against each other.
Free margin. Equity minus margin: the money available to open new trades.
Gain. A general word for an account's return. Different websites and platforms calculate "gain" in different ways, so always check the method.
Gap. A jump in price from one level to another with no trading in between, most often between Friday's close and Monday's open. Gaps can make stops and close-outs happen at worse prices.
Grid trading. A strategy that opens trades at set price intervals as price moves, and closes them as a group when price recovers enough. Losses build up when price keeps moving one way. See What is grid trading in forex?
Hedging. Opening a position to offset the risk of another, for example holding a buy and a sell on the same pair. It can reduce swings but adds costs and doesn't remove risk.
Leverage. Controlling a position larger than the money you put down. With 30:1 leverage, £1 of margin controls £30 of exposure. Leverage magnifies losses as well as gains. See What is leverage in forex?
Liquidity. How quickly something can be bought or sold without moving the price much. Low liquidity can mean wider spreads and bigger price jumps.
Long. A position that profits if price rises (a buy).
Lot. A standard unit of trade size. A standard lot is usually 100,000 units of the base currency; 0.10 is a mini lot and 0.01 a micro lot. See Forex lot size explained.
Major and minor pairs. In the FCA's rules, a major pair is any two of the US dollar, euro, Japanese yen, pound sterling, Canadian dollar and Swiss franc. Every other pair is a minor pair, and UK retail leverage limits are lower for minor pairs.
Margin. The money set aside from your account to open and keep a leveraged position. It isn't a fee, and it isn't the most you can lose.
Margin call. A warning that your margin level has fallen to a level set by your broker. It usually comes after a large part of the account has already been lost. See Margin call vs stop out.
Margin level. Equity divided by margin, as a percentage. As losses grow, margin level falls.
Market order. An order to buy or sell straight away at the best available price, which may differ from the price you saw.
Martingale. Increasing the size of the next trade after a loss, or as price moves against you, so that a smaller recovery wins back the losses. Losses can grow faster than the price move and lead to the loss of all the money in the account. See What is a martingale strategy in forex?
MetaTrader 5 (MT5). A widely used trading platform made by MetaQuotes. Brokers offer it to their clients. Naming it here isn't a recommendation.
MyFXBook. A third-party website that can connect to trading accounts and publish their statistics. How to read it is explained in How to read a MyFXBook track record.
Pip. The standard small unit of price movement in a currency pair. For most pairs it's the fourth decimal place (0.0001). For pairs involving the Japanese yen, it's the second (0.01).
Pip value. How much money a 1-pip move is worth on a given trade size. On EUR/USD, 1 standard lot is worth about $10 per pip.
Position. An open trade.
Quote currency. The second currency in a pair. In EUR/USD, the US dollar is the quote currency.
Realised profit or loss. The profit or loss locked in when a trade is closed.
Rolling spot forex. A leveraged forex contract that's rolled over each day rather than settled, treated like a CFD under UK rules.
Short. A position that profits if price falls (a sell).
Slippage. The difference between the price you expected and the price a trade actually fills at, common in fast markets.
Spread. The difference between the bid and ask prices. It's a cost on every trade.
Stop loss. An order to close a trade if price reaches a set level, to limit a loss. It isn't a promise of the exit price: in a gap or fast market, it can fill at a worse price.
Stop out. The level at which a broker starts closing your trades because your margin level is too low. On MT5 the trade with the largest loss is normally closed first. See Margin call vs stop out.
Swap (overnight financing). A charge or credit for holding a position overnight. It can add up for trades held for days or weeks.
Take profit. An order to close a trade when it reaches a set profit.
Track record. The history of an account's or strategy's results. A track record shows what happened in the past, and past performance is not a reliable indicator of future results.
VPS (virtual private server). A remote computer that runs all the time, often used to keep trading software online.
Win rate. The percentage of trades, or groups of trades, that close at a profit. A high win rate says nothing about how large the losses are when they come.
Copy-trading and copier terms
Copy trading. Linking your account to someone else's strategy, so their trades are opened and closed in your account automatically. The FCA treats copy trading with no manual input from the account holder as portfolio management, which needs authorisation. See What is copy trading?
Trade copier. Software that repeats the trades from one account in other accounts. A copier doesn't make a strategy less risky. See How does a trade copier work?
Master account. The account whose trades are copied (also called the provider or source account).
Follower account. The account that receives the copied trades (also called the receiver).
Lot scaling. The rule a copier uses to work out the size of each copied trade, for example by the ratio of the two accounts' equity, or a fixed multiplier.
Symbol mapping. Matching instrument names between brokers, such as EURUSD and EURUSD.a.
Latency. The delay between a trade on the master account and the copied trade on the follower.
Signals, PAMM and MAM. Other ways of following a trader: signals are trade ideas you act on yourself, while PAMM and MAM are broker systems where a manager trades a pooled or linked set of accounts. See Copy trading vs signals vs PAMM/MAM.
Risk terms
Drawdown (balance vs equity). Balance drawdown only counts closed trades; equity drawdown includes open ones and is usually deeper for strategies that hold losing trades open. See Equity vs balance.
Maximum drawdown. The largest fall from a peak to a later low over a record's whole period. It's a record of the past, not a ceiling for the future.
Margin close-out rule. For retail clients of UK firms, the rule that the firm must close positions once account equity falls below 50% of the margin needed to keep them open.
Risk of ruin. The chance that a strategy loses so much that the account can't recover, or is wiped out. Strategies that add to losing positions can carry a high risk of ruin even when they usually win. See Averaging down and risk of ruin.
Concentration risk. The extra risk of having everything in one strategy or one market, with nothing to offset a bad period.
Retail loss percentage. The share of a firm's retail CFD accounts that lost money over the last 12 months. UK CFD firms must publish it in their risk warnings. See Why most retail CFD traders lose money.
Regulation terms
FCA (Financial Conduct Authority). The UK regulator for financial services firms. Most firms offering financial services in the UK must be authorised or registered by it.
FCA Register. The FCA's public record of authorised firms and individuals, and what they're allowed to do.
FCA Warning List. The FCA's list of firms and individuals it's concerned are operating without permission, including clone firms. Not being on the list doesn't mean a firm is authorised.
Clone firm. A scam that copies the name, details or website of a genuine authorised firm. See Forex scams in the UK: warning signs.
Financial Ombudsman Service (FOS). A free service that can settle complaints between consumers and authorised financial firms.
Financial Services Compensation Scheme (FSCS). The UK scheme that may pay compensation if an authorised firm fails and can't return your money or investments. For investments the limit is £85,000 per eligible person, per firm. It doesn't cover trading losses.
Unauthorised firm. A firm that isn't authorised by the FCA. If you deal with one, you won't be covered by the Financial Ombudsman Service or the FSCS. The same checks apply to us. Rise Together FX is not authorised or regulated by the Financial Conduct Authority. That means you couldn't take a complaint about us to the Financial Ombudsman Service or claim from the Financial Services Compensation Scheme.
CASS (client money rules). FCA rules requiring authorised firms to keep clients' money separate from their own.
Negative balance protection. For retail clients of UK firms trading CFDs, a rule that your losses are limited to the money in your CFD account. Don't assume it applies to accounts with brokers outside the UK.
Retail client and professional client. Most individuals are retail clients, with the most protection. Being treated as a "professional" client removes some protections, including UK leverage limits. The FCA has warned about firms pressuring people to opt up.
ESMA. The European Securities and Markets Authority, whose 2018 CFD restrictions the FCA made permanent in the UK in 2019.
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Past performance is not a reliable indicator of future results. Your capital is at risk.
Rise Together FX is not authorised or regulated by the Financial Conduct Authority.
Author: Rise Together FX team · Last reviewed: 6 October 2026
Important: Capital at risk. Past performance is not a reliable indicator of future results. Read the full risk warning.