Trading Glossary

Ask Price

The price at which the market is willing to sell an asset. Traders buy at the ask price.

Bid Price

The price at which the market is willing to buy an asset. Traders sell at the bid price.

Spread

The difference between the bid price and the ask price. It represents the cost of trading.

Leverage

A tool that allows traders to control a larger position with a smaller amount of capital. Leverage increases both potential profits and risks.

Margin

The amount of money required to open and maintain a leveraged trading position.

Margin Call

A notification that additional funds are required to maintain open positions when account equity falls below the required level.

Contract for Difference (CFD)

A trading instrument that allows traders to speculate on price movements without owning the underlying asset.

Lot

The standard unit size of a trade. Lot sizes can vary depending on the market and instrument.

Stop-Loss

An order placed to automatically close a trade at a specified price to limit potential losses.

Take-Profit

An order placed to automatically close a trade once a specified profit level is reached.

Long Position

A trade placed when a trader expects the market price to rise.

Short Position

A trade placed when a trader expects the market price to fall.

Volatility

The degree of price movement in a market over a certain period. Higher volatility means larger price fluctuations.

Liquidity

The ability to buy or sell an asset quickly without significantly affecting its price.

Equity

The total value of a trading account, including balance plus or minus open profits or losses.

Balance

The amount of money in a trading account excluding open trades.

Pips

A unit used to measure price movement in Forex trading, usually the smallest change in price.

Market Order

An order to buy or sell an asset immediately at the current market price.

Pending Order

An order set to open a trade automatically when the market reaches a specific price.

Swap

An overnight interest fee applied to positions held open beyond the trading day.

Hedging

A strategy used to reduce risk by opening opposing positions in related markets.