Forex glossary
Plain definitions of the terms used on this site.
- Ask priceThe ask is the price at which you can buy a currency pair. It is always higher than the bid, and the difference between the two…
- Base currencyThe base currency is the first currency in a pair. In EUR/USD it is the euro, and the price shows how many US dollars one euro…
- Bid priceThe bid is the price at which you can sell a currency pair. It is always lower than the ask.
- CFDA contract for difference is an agreement to exchange the change in price of an asset between opening and closing a trade, without owning the asset.…
- Clone firmA clone firm is a fraudster that copies the name, licence number or address of a genuinely authorised firm to look legitimate, usually with a different…
- CommissionA commission is a fixed fee per trade, usually quoted per standard lot and per side or round turn. Raw-spread accounts charge a commission instead of…
- Compensation schemeA compensation scheme pays eligible clients, up to a limit, when a regulated firm fails and cannot return client assets. Whether one applies depends on the…
- Copy tradingCopy trading automatically repeats another trader's positions in your account in proportion to the amount you allocate. You keep the profits and bear the losses.
- Dealing deskA dealing desk broker, or market maker, takes the other side of client trades itself and manages the resulting risk internally.
- Demo accountA demo account lets you trade with virtual money on live or simulated prices. Execution on a demo account can be better than on a real…
- Dossier ScoreDossier Score is this site's measure, out of 100, of how well a broker is regulated for a given country. It is calculated by a published…
- ECNAn electronic communication network matches orders from several participants. Brokers use the label for accounts that pass orders to external liquidity at raw spreads plus a…
- EquityEquity is your account balance plus or minus the result of your open positions. Margin calls and stop-outs are triggered by equity, not balance.
- Expert AdvisorAn Expert Advisor is a program that trades automatically on the MetaTrader platforms.
- HedgingHedging means holding positions that offset each other, such as a buy and a sell in the same pair. It is not allowed within one account…
- Introducing brokerAn introducing broker refers clients to a broker and is paid for it, usually per traded lot or per funded account. This site is paid in…
- Legal entityA legal entity is the specific company you sign a client agreement with. One broker brand usually operates several, each under a different regulator.
- LeverageLeverage lets you control a position larger than your deposit. At 30:1, a deposit of 1,000 controls a position of 30,000, and both gains and losses…
- Liquidity providerA liquidity provider is a bank or trading firm that quotes prices at which a broker can offset client orders.
- LotA standard lot is 100,000 units of the base currency. A mini lot is 10,000 units and a micro lot is 1,000 units.
- MarginMargin is the amount set aside from your account to keep a leveraged position open. It is a deposit, not a fee.
- Margin callA margin call is a warning that your equity has fallen close to the margin required for your open positions.
- Market makerA market maker quotes its own buy and sell prices and takes the other side of client trades. See dealing desk.
- Negative balance protectionNegative balance protection means you cannot lose more than the money in your account. It is a legal requirement for retail clients in the UK, EU…
- Offshore entityAn offshore entity is a company licensed or registered in a jurisdiction with light financial regulation, such as Seychelles, Vanuatu or Belize.
- PipA pip is the standard unit of price movement: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen.
- Quote currencyThe quote currency is the second currency in a pair. Profit and loss on a trade are first calculated in the quote currency.
- Raw spreadA raw spread is the spread received from liquidity providers without a broker mark-up. Accounts with raw spreads charge a separate commission.
- RequoteA requote happens when a broker cannot fill an order at the requested price and offers a new one.
- Retail clientA retail client is an ordinary individual trader, as opposed to a professional client. Retail clients get the strongest regulatory protections and the lowest leverage.
- Segregated accountA segregated account keeps client money separate from the broker's own funds so that it is not available to the broker's creditors.
- SlippageSlippage is the difference between the price you expected and the price at which your order was filled. It can work for or against you.
- SpreadThe spread is the difference between the bid and the ask price. It is the main trading cost on spread-only accounts.
- Stop-outA stop-out is the automatic closing of positions when equity falls below a set percentage of required margin.
- STPStraight-through processing means a broker passes client orders to liquidity providers without manual intervention.
- SwapA swap is the interest paid or charged for holding a position overnight, based on the interest rate difference between the two currencies plus a broker…