Trading glossary

The words you will meet in signal channels, broker terms and prop firm rules, in plain English.

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Ask: The price you buy at. It is always slightly higher than the bid; the gap is the spread.

Balance: The money in your account from closed trades and deposits. It ignores open positions, which is what equity adds.
Base currency: The first currency in a pair. In EUR/USD the euro is the base, and the price says how many dollars one euro costs.
Bid: The price you sell at. Charts usually show the bid price.
Breakeven: Moving a stop loss to the entry price once a trade is in profit, so it can no longer lose (apart from costs and slippage). Many signal services do this after the first target is hit.

CFD: Contract for difference. A contract with a broker that pays out the change in an asset's price without you owning the asset. Most retail forex, gold and index trading outside the US is done through CFDs.
Challenge: The evaluation a prop firm sells. You trade a demo account to a profit target without breaking its loss limits; passing earns a funded account. Best prop firms
Commission: A fee charged per lot traded, usually on raw-spread accounts. Quoted per side or round turn (open and close). Trading cost calculator
Copy trading: Having another trader's positions opened on your account automatically. Unlike signals, you do not place the trades yourself.

Daily loss limit: A prop firm rule capping how much you can lose in one day, often 4% to 5% of the starting balance. Breaking it fails the account.
Drawdown: A fall from a peak in account value to a later low, given as a percentage. Maximum drawdown is the largest such fall over a period. Drawdown recovery calculator

EA (Expert Advisor): An automated trading program for MetaTrader. Many prop firms restrict or ban third-party EAs.
Entry: The price at which a trade is opened. Signals give either an exact entry or a zone.
Equity: Your balance plus or minus the profit or loss on open positions. Margin calls and prop firm drawdown rules are often based on equity.

FCA: The Financial Conduct Authority, the UK regulator that licenses brokers. Its online register shows whether a firm is authorized.
Free margin: Equity minus the margin already used by open positions. It is what is left to open new trades or absorb losses.
Funded account: A prop firm account you trade after passing the challenge, sharing the profits with the firm. It is usually still a simulated account.

Hedging: Opening a position that offsets another, such as a buy and a sell on the same pair. Some brokers and prop firms do not allow it.

Leverage: Trading a position larger than the money you put up. At 50:1, the US limit on major pairs, $1,000 of margin controls a $50,000 position. Leverage magnifies losses as well as gains. Margin calculator
Limit order: An order to buy below or sell above the current price, filled only at that price or better.
Lot: The unit of trade size. A standard lot is 100,000 units of the base currency on forex pairs and usually 100 ounces on gold. A mini lot is 0.10 and a micro lot 0.01.

Margin: The money set aside from your balance to keep a leveraged position open. Margin calculator
Margin call: A warning that equity has fallen close to the margin required. If it keeps falling to the stop-out level, the broker closes positions.
Market order: An order to buy or sell immediately at the best available price.
Myfxbook: A site that connects to a trading account and publishes its results. A verified Myfxbook link is stronger evidence than screenshots, as long as it is a live account.

Negative balance protection: A rule that stops your account going below zero, so you cannot lose more than you deposited. Required for retail CFD accounts in the UK and EU.

Pip: The standard unit of price movement: 0.0001 on most pairs and 0.01 on yen pairs. On gold most providers treat $0.10 as a pip, but conventions differ. Pip value calculator
Pipette: A tenth of a pip, the extra decimal most brokers now quote.
Position size: How many lots a trade uses. Set it from the amount you are willing to lose and the distance to your stop. Position size calculator
Profit split: The share of profits a prop firm pays you from a funded account, commonly 80% to 90%.
Prop firm: Short for proprietary trading firm. Retail prop firms sell challenges and pay a share of profits to traders who pass. Best prop firms

Quote currency: The second currency in a pair. Profit and loss on the pair is worked out in this currency first.

Risk/reward ratio: The distance to the target divided by the distance to the stop. A 30-pip stop and 90-pip target is 1 : 3. Risk/reward calculator

Scalping: Trading for very small moves, often a few pips, with trades lasting seconds to minutes. Costs matter a great deal.
Signal: A trade idea sent to subscribers, normally with an entry, a stop loss and one or more take-profit levels. Best forex signals
Slippage: The difference between the price you asked for and the price you got, common around news and on stop orders.
Spread: The gap between the bid and ask price. It is the main cost of a trade on accounts without commission.
Stop loss: An order that closes a trade at a set price to limit the loss. A signal without one is incomplete.
Stop-out level: The margin level at which a broker starts closing your positions automatically, often 50% in the UK and EU.
Swap: A charge or credit for holding a position overnight, based on the interest rate difference between the two currencies. Usually tripled on Wednesday nights. Trading cost calculator
Swing trading: Holding trades for days to weeks to catch larger moves. Fewer signals, wider stops and swap costs to consider.

Take profit: An order that closes a trade at a set profit. Gold and forex signals often give two or three take-profit levels (TP1, TP2, TP3).
Trailing drawdown: A prop firm loss limit that moves up as your account makes new highs, so it gets tighter as you profit. Stricter than a static limit.
Trailing stop: A stop loss that follows price at a set distance as the trade moves in your favor.

XAU/USD: The price of one troy ounce of gold in US dollars. Best gold signals