Forex glossary
The trading words used on the calculators, in plain English. On any calculator, tap a word with a dotted underline to see its meaning without leaving the page.
- Balance
- The money in your account, not counting open trades.
- Base currency
- The first currency in a pair. In EUR/USD it is the euro: the price says how many dollars one euro costs.
- Break-even win rate
- The win rate you need just to cover your losses at a given reward/risk ratio, before costs.
- Commission
- A fee some brokers charge for each lot traded, on top of the spread.
- Compounding
- Earning returns on your earlier returns, so growth builds on itself (and so do losses).
- Drawdown
- How far your account has fallen from its highest point, usually as a percentage.
- Equity
- Your balance plus the profit or loss of your open trades.
- Expectancy
- The average result of a trade over many trades, found from your win rate and reward/risk ratio. Positive means the method makes money on average.
- Fibonacci levels
- Reference prices found by applying ratios such as 38.2%, 50% and 61.8% to a price swing.
- Free margin
- Your equity minus the margin already in use. It is what you have left to open new trades or absorb losses.
- Leverage
- Borrowing from your broker so a small deposit controls a bigger position. With 1:100 leverage, 1,000 controls 100,000. It magnifies losses as well as gains.
- Lot
- The size of a trade. One standard lot is 100,000 units of the base currency; a mini lot is 10,000 and a micro lot is 1,000.
- Margin
- The deposit your broker sets aside while a trade is open. It is not a cost: you get it back when the trade closes.
- Margin level
- Equity divided by margin used, as a percentage. When it falls below your broker's limit you get a margin call or trades are closed.
- Pip
- The smallest standard step in a forex price. On most pairs it is the fourth decimal place (0.0001); on yen pairs it is the second (0.01).
- Pip value
- How much money one pip is worth for your trade size and account currency.
- Pipette
- One tenth of a pip. Many brokers show prices to the pipette, the extra last digit.
- Pivot point
- A price level worked out from the last period's high, low and close, with support and resistance levels around it. Traders use them as reference prices.
- Prop firm challenge
- A paid test run by a trading firm: reach a profit target without breaking loss limits, and you may be offered a funded account.
- Quote currency
- The second currency in a pair, the one the price is given in. In EUR/USD it is the US dollar.
- Risk of ruin
- The chance that a run of losses takes your account down to a level where you can no longer trade.
- Risk/reward ratio
- How much you stand to gain compared with what you risk. Risking 50 pips to make 100 is a ratio of 1 : 2.
- Spread
- The gap between the buying price and the selling price. It is the main cost of opening a trade.
- Stop loss
- An order that closes a trade automatically if the price moves against you by a set distance, so the loss stays at the size you planned.
- Support and resistance
- Prices where the market has often paused or turned: support below the price, resistance above it.
- Swap
- A small fee or credit for holding a trade open overnight, based on interest rates.
- Take profit
- An order that closes a trade automatically once it has gained a set distance.
- Units
- The actual amount of the base currency you are buying or selling. 0.1 lot of EUR/USD is 10,000 euros.
- Win rate
- The share of your trades that make money. 45 wins out of 100 trades is a 45% win rate.
Ready to use them? Try the position size calculator or the pip value calculator.