Forex Glossary

ADX (Wilder) tells you whether price is trending or ranging. Below 20: weak/range. Above 25: emerging trend. Above 40: strong trend. 50+: very strong.

Also called: DMI

Algorithmic ('algo') trading covers everything from simple MetaTrader EAs to multi-million-dollar institutional systems. The label says nothing about the strategy itself — it's about the execution method.

Also called: algo trading, systematic trading

AML rules complement KYC. Brokers must monitor for unusual patterns (large round-number deposits from third parties, rapid withdrawals to different accounts) and file Suspicious Activity Reports.

Also called: Anti-Money Laundering

Anti-martingale aligns with positive expectancy: press your edge when winning, protect capital when losing. Position sizing rules like fixed-fractional and Kelly are forms of anti-martingale.

Also called: reverse martingale, pyramiding

API trading bypasses the broker's GUI entirely. Used by developers, hedge funds, and serious individual quants. Most major brokers expose REST + WebSocket APIs; ECN brokers also offer FIX (institutional-grade).

Also called: broker API

True arbitrage is largely extinct in retail FX — institutional players close gaps in microseconds. What retail calls 'arbitrage' (latency arb, broker arb) usually relies on broker pricing errors and is heavily restricted by terms of service.

ASIC regulates financial services and corporate conduct in Australia. ASIC-regulated brokers must segregate client funds and hold AFSL (Australian Financial Services Licence).

Also called: Australian Securities and Investments Commission, AFSL

The ask (sometimes 'offer') is the higher of the two prices in a quote. Buy orders fill at the ask. The difference between bid and ask is the spread.

Also called: ask, offer

AUD/USD ('Aussie') is the classic commodity-currency proxy and a high-beta risk asset. Strong when Chinese growth and commodities are buoyant, weak when global growth disappoints.

Also called: AUDUSD, Aussie

ATR (Wilder, 1978) is the average of the 'true range' over N periods. True range captures gaps (it's the max of high-low, high-prev-close, low-prev-close) so ATR reflects real volatility, not just intraday swing.

Also called: ATR

TR = max(High−Low, |High−PrevClose|, |Low−PrevClose|)
ATR = SMA(TR, n)  (default n = 14)

Backtesting reveals whether a strategy has historical edge before risking real money. It's also the easiest place to lie to yourself — curve-fitting parameters until the equity curve looks great is trivial and meaningless.

Also called: historical testing

BaFin supervises banks, insurers, and securities firms in Germany. BaFin-regulated FX brokers operate under MiFID II rules and ESMA leverage caps; the country also requires negative balance protection for retail clients.

Also called: Federal Financial Supervisory Authority

Balance and equity match when no trades are open. Balance is the 'realised' view; equity is the 'mark-to-market' view.

In EUR/USD, EUR is the base. The quote (1.0800) tells you how many units of the quote currency one unit of the base buys.

The bid is the lower of the two prices in a quote. When you place a sell order, you sell at the bid. The bid moves up and down as liquidity providers update their willingness to buy.

Also called: bid

Bollinger Bands (John Bollinger, 1980s) plot a centre line (typically 20-SMA) with two outer bands at ±2 standard deviations. The bands expand when volatility rises and contract when it falls.

Also called: BB, BBands

Middle = SMA(20)
Upper = Middle + 2σ
Lower = Middle − 2σ

A break-even stop is a manual or automated move of your SL to entry price once price has moved a certain distance in your favour. Once moved, the worst case is zero (minus spread/commission).

Also called: BE stop

Breakouts attract momentum traders — once a level breaks, stops above/below are triggered and new orders pile in. The danger: false breakouts where price pops just above resistance only to reverse.

Also called: breakout entry

GBP/USD was the first pair to be quoted in real-time across the Atlantic, via the transatlantic telegraph cable. The nickname stuck for 150+ years.

Each candle has a body (open to close) and wicks (high above body, low below). Green/white = close > open (bullish); red/black = close < open (bearish).

Also called: candle

The classic carry trade: long AUD/JPY when AUD rates are above JPY rates — collect swap nightly, gamble on no major risk-off event. Historically profitable in calm markets, devastating during shocks (2008, 2015 CHF crash, etc.).

Also called: carry

Cent accounts solve the 'demo to live' problem: traders can experience real psychology with negligible financial risk. Common at certain offshore brokers; rarely available at Tier-1 entities.

Also called: micro account

The CFTC oversees the NFA and is the ultimate authority for retail FX in the US. Together with the Dodd-Frank Act post-2010, CFTC rules force any broker serving US retail to register, segregate funds, and abide by 50:1 max leverage.

Also called: Commodity Futures Trading Commission

ECN brokers usually charge commission instead of (or alongside) marking up the spread. Standard rate: ~$3.50 per side per standard lot, so $7 round-turn per lot. Compare on a total-cost basis (spread + commission) rather than spread alone.

CCI (Donald Lambert, 1980) measures how far the typical price (HLC/3) is from its moving average, scaled by mean deviation. Despite the name it works on any market, not just commodities.

Also called: CCI

CCI = (Typical Price − SMA(TP)) / (0.015 × Mean Deviation)
Typical Price = (High + Low + Close) / 3

Commodity currencies tend to be high-beta risk assets — they rally with global growth and commodity demand, sell off during risk-off events. AUD (iron ore), CAD (oil), NZD (dairy), NOK (oil), ZAR (gold, platinum).

Also called: commodity-linked currency

Compounding is what turns a steady % return into outsized long-term wealth. At 2% per month compounded, $10,000 becomes $26,800 in 5 years; at simple 2% per month it's $22,000.

Future Value = Principal × (1 + r)^n

Copy trading platforms (eToro, ZuluTrade, broker-native systems) let users follow specific traders. Returns depend entirely on the chosen leader; survivor-ship bias in 'top trader' lists is severe.

Also called: mirror trading, auto-follow

Correlation matters for position sizing — running 3 long trades on positively-correlated pairs is effectively one big trade, not three independent ones.

Cross pairs typically have wider spreads than majors because they're derived from two USD pairs internally. Their volatility profile is also different — often more directional than majors during specific sessions.

Also called: cross, non-USD pair

cTrader is often considered the closest retail equivalent to institutional ECN platforms. Level 2 depth, advanced charting, cBots (C# automation), and a clean modern UI.

Also called: cTrader Web

ISO 4217 is the international standard for currency identification. The first two letters typically come from the country code (ISO 3166), the third from the currency name. Some commodities have synthetic codes — XAU (gold), XAG (silver), XBT (Bitcoin).

Also called: ISO 4217

Custom indicators extend MT4/MT5 with anything from variations on standard indicators (e.g. RSI with divergence alerts) to entirely new tools (volume profile, market regime classifiers).

Also called: indicator

CySEC licences let firms passport their services across all EU/EEA member states under MiFID II. CySEC brokers must segregate client funds and contribute to the Investor Compensation Fund (up to €20,000 per client).

Also called: Cyprus Securities and Exchange Commission

Dark pools let institutions move large blocks without telegraphing intent to the wider market — preventing other traders from front-running the order.

Also called: ATS, alternative trading system

Day traders typically hold positions minutes to hours and exit before session close to avoid overnight risk (gaps, swap, weekend exposure). Style sits between scalping (seconds) and swing trading (days).

Also called: intraday trading

Demo accounts are essential for learning platforms, testing strategies, and forward-testing EAs. Limitations: execution is often better than live (no realistic slippage), and psychology is fundamentally different when no real money is at risk.

Also called: paper account, practice account

Discretionary trading lets you adapt to context that's hard to encode (geopolitical risk, exhausted-looking moves, unusual price action). Downside: results are very hard to backtest and even harder to debug — was the loss bad analysis or bad execution?

Also called: judgment-based trading

Diversification works when positions are genuinely uncorrelated — long EUR/USD and long GBP/USD aren't diversified (both are short USD). True diversification spans asset classes, strategies, and timeframes.

DMA lets traders interact directly with liquidity providers' order books rather than the broker's bucket. Spreads can be tighter and execution more transparent, at the cost of higher account minimums and complexity.

Also called: DMA

For retail FX, Dodd-Frank imposed 50:1 leverage caps, mandatory segregation, FIFO matching, and massive net-capital requirements that drove most foreign brokers out of the US market.

Also called: Dodd Frank

A doji shows that buyers and sellers fought to a draw over the period. Long upper and lower wicks emphasise the indecision. In context (at a key level, after a strong move) a doji can mark exhaustion.

Donchian Channels (Richard Donchian, 1950s) plot two simple lines: the highest high and lowest low of the last N bars. A breakout above/below either line is the classic Turtle Traders entry.

Mirror of the double top. Two lows at similar prices, separated by a relief rally. Confirmation: close above the swing high between the lows. Target: height of pattern projected up.

Also called: W pattern

Double tops form when an uptrend stalls at resistance, pulls back, retests the same level, and fails. Confirmation: close below the swing low between the two peaks. Target: height of the pattern projected down.

Also called: M pattern

Drawdown measures how much your account has fallen from its highest balance. Every strategy has drawdowns; the question is how big, how long, and how often.

Also called: DD

Drawdown % = (Peak − Trough) / Peak × 100

True ECN brokers earn from commission and never trade against client orders. Spreads are 'raw' (close to interbank) and commission is added on top. Best execution model for scalpers and high-volume traders.

Also called: ECN

EMIR affects FX through reporting obligations (every derivative trade reported to a trade repository) and risk-mitigation requirements between counterparties. Mostly transparent to retail traders, but shapes how brokers process trades.

Also called: European Market Infrastructure Regulation

Bullish engulfing: down candle followed by a larger up candle that engulfs it. Bearish engulfing: up candle followed by a larger down candle.

Also called: bullish engulfing, bearish engulfing

Equity differs from balance whenever you have open trades. Balance updates only on closed trades; equity updates tick-by-tick with open P&L.

Equity = Balance + Unrealised P&L on open positions

A clean upward-sloping equity curve with shallow drawdowns is the gold standard. Wild swings, flat periods, and deep drawdowns are warnings even if the total return looks good.

ESMA's intervention measures, made permanent by national regulators, also mandated negative balance protection and standardised risk warnings.

Also called: ESMA caps

EUR/USD accounts for roughly 23% of daily FX volume. Tightest typical spread (0.1–1 pip), deepest liquidity, most analyst coverage. Driven primarily by ECB vs Fed policy differential.

Also called: EURUSD, Euro Dollar, Fiber

Exotic pairs can be very profitable for the prepared (huge moves, strong fundamentals) but punishing for the careless (wide spreads, sudden gaps, political risk). Carry trades historically favoured exotics for their yield differentials.

Also called: exotic pairs

Expectancy tells you what to expect from one average trade, in either dollars or R. Positive expectancy = profitable system over time; negative = you're paying to gamble.

Also called: per-trade expectancy

Expectancy = (Win% × Avg Win) − (Loss% × Avg Loss)

EAs run inside MT4 or MT5, monitoring price tick-by-tick and executing the trading logic the developer wrote. They can be 100% automated, semi-automated (signals only), or trade-management aids.

Also called: EA, robot, trading bot

The EMA applies a smoothing factor that exponentially down-weights older prices. The result tracks current price more closely than an SMA of the same length, at the cost of being noisier.

Also called: exponential MA

EMA_today = (Price_today × α) + EMA_yesterday × (1 − α)
α = 2 / (N + 1)

False breakouts (or 'fakeouts') are the breakout trader's nightmare and the reversal trader's setup. They typically happen at obvious levels where stops cluster — institutions push price just past the level to trigger stops, then reverse.

Also called: fakeout, bull trap, bear trap

The FCA regulates ~50,000 financial firms in the UK and is widely considered one of the strictest forex regulators globally. FCA-regulated brokers must hold client funds in segregated accounts and participate in the Financial Services Compensation Scheme (FSCS — up to £85,000 per…

Also called: Financial Conduct Authority

'Fiber' is the modern nickname for EUR/USD, riffing on Cable. Less commonly heard than 'Cable' for GBP/USD, but standard in trading rooms.

While retracements look at pullbacks within a move, extensions project where the next leg might end. Common targets: 127.2%, 161.8%, 200%, and 261.8% of the original impulse.

Also called: fib extension

After an impulse move, price typically retraces a portion of it before resuming. Fibonacci ratios — derived from the Fibonacci sequence — mark the levels traders watch for that retracement.

Also called: fib retracement, fibs

FOK is an execution instruction used mostly in institutional and ECN trading. The order must fill in full, at the specified price, the instant it hits the venue — otherwise it's cancelled.

Also called: FOK

FINMA-licensed FX brokers operate under banking-grade capital and conduct requirements. Less common in retail FX (Swiss brokers tend to focus on HNW clients), but highly respected when present.

Also called: Swiss Financial Market Supervisory Authority

FIX is the standard protocol banks and ECNs use to communicate. It's faster than REST/WebSocket but more complex to implement. Retail traders typically need a 'Pro' or institutional account to access broker FIX gateways.

Also called: FIX

Fixed-spread brokers absorb the volatility of raw market spreads themselves. The trade-off: average spreads are wider, but you don't get burned by sudden widening during news. Mostly offered by market-maker brokers.

Flags form during pauses in strong trends: a sharp impulse ('flagpole') followed by a tight, counter-trend channel. Breakout from the flag in the direction of the original impulse targets the flagpole height from the breakout.

Also called: bull flag, bear flag

Forward testing exposes everything backtesting hides: real spreads, real slippage, real broker quirks, and the trader's own emotions. A strategy that survives 3+ months of demo forward-testing has earned a small real-money allocation.

Also called: live testing, paper trading

Free margin = Equity − Used margin. As open trades go in/out of profit, free margin breathes accordingly. When free margin hits zero, no new trades can open; when used margin exceeds equity, margin call territory.

Also called: available margin

Free Margin = Equity − Used Margin

The FSC Mauritius licenses non-bank financial services including FX brokers. Less stringent than Tier-1 regulators but with formal segregation and disclosure requirements.

Also called: FSC

The FSCA replaced the FSB in 2018 and supervises FX brokers, asset managers, and other non-banking financial services in South Africa. Regulated brokers must segregate client funds.

Also called: Financial Sector Conduct Authority

GBP/USD got its nickname from the transatlantic telegraph cable that originally carried the exchange rate quotes. Daily ranges are typically 30–50% wider than EUR/USD.

Also called: GBPUSD, Cable

GTC is the default expiry behaviour for most retail FX brokers — pending orders sit until they fill, you cancel them, or some far-future broker-enforced limit (often 90 days).

Also called: GTC

Grid systems work great in ranges and catastrophically in trends. The classic failure mode: deep, expanding grid that gets margin-called when price walks one direction without retracement.

Also called: grid

A hammer signals sellers pushed price down, but buyers absorbed the move and closed near the high. The longer the lower wick relative to the body, the stronger the signal.

Also called: hammer candle

The head-and-shoulders is one of the most reliable classical reversal patterns. The 'neckline' connects the lows between the three peaks; entry is on a break and close below the neckline; target is typically the height of the head projected down from the neckline.

Also called: H&S, H and S

True hedging uses correlated instruments to cancel out a specific risk (e.g. holding a USD asset and selling USD futures). Retail FX 'hedging' often means holding opposite positions in the same pair — which is mathematically a closed trade, just with double spread and swap cost.

Also called: hedge

HFT is the domain of institutional players with co-located servers, FIX-API access, and infrastructure budgets in the millions. Retail 'HFT' is mostly a marketing label — true HFT requires latency advantages retail simply can't access.

Also called: HFT

An iceberg order splits a large order into smaller visible slices. As each slice fills, the next is revealed — the total order size stays hidden from other participants.

Also called: hidden order, reserve order

Ichimoku Kinko Hyo ('one-glance equilibrium chart') was published by Goichi Hosoda in 1969. It plots five lines including the famous Kumo (cloud) — a shaded area projecting forward support/resistance.

Also called: ichimoku, kumo

IOC is FOK's looser cousin: any amount that can fill immediately at your price does; the rest is cancelled rather than left as a working order.

Also called: IOC

An inside bar is a volatility contraction. After a strong move, the inside bar marks a pause. Traders enter on a break of the parent (mother) candle's high or low.

Also called: IB, harami

Major schemes: FSCS (UK, £85k), ICF (Cyprus, €20k), Investor Protection Levy (Germany, €20k). US has no direct equivalent for retail FX (the NFA does not run a compensation scheme).

Also called: ICS, FSCS, ICF

Islamic accounts replace swap with a small per-night admin fee on positions held past rollover (after a free grace period). Most reputable brokers offer them to Muslim traders on request.

Also called: swap-free account

Kelly answers 'what fraction of bankroll should I bet?' For binary outcomes: f* = (bp − q) / b where b is net odds, p is win probability, q = 1 − p.

Also called: Kelly

f* = (b × p − q) / b
p = win probability, q = loss probability (1 − p), b = net odds (R:R)

Similar to Bollinger Bands but uses ATR instead of standard deviation. Less reactive to outliers, more stable for trend channels.

Middle = EMA(20)
Upper = Middle + (2 × ATR(10))
Lower = Middle − (2 × ATR(10))

KYC typically requires: government ID (passport / driver's licence), proof of address (utility bill, bank statement < 3 months old), and sometimes proof of source of funds for larger accounts.

Also called: Know Your Customer

Total latency = network latency (you to broker server) + broker internal latency + liquidity provider latency. Retail traders typically see 50–300ms; co-located institutional traders see microseconds.

Also called: execution latency

Latency arb is profitable in theory but extremely hard in practice: brokers monitor for it, void trades, close accounts. Many retail 'latency arb' EAs are scams or work only briefly before being detected.

Also called: latency arb

Leverage amplifies both gains and losses. A 1% price move on a fully leveraged 1:100 position is a 100% P&L move on the underlying margin. Regulated retail leverage caps: 1:30 (ESMA/FCA majors), 1:50 (NFA US majors), up to 1:500–1:1000 (offshore).

Also called: margin ratio

Leverage = Position notional / Margin used

A limit order tells the broker: only fill me at this price or better. Buy limits sit below the current market; sell limits sit above.

Also called: limit buy, limit sell

In FX, liquidity is fragmented across banks, ECNs, and prime brokers. Liquidity pools (or LPs) aggregate these sources so retail brokers can offer one combined price.

Also called: LP, liquidity provider

Most brokers offer multiple live account types (standard, ECN, raw spread, cent, Islamic, etc.) with different commission models, minimums, and leverage caps.

Also called: real account

'Lot' originally meant 100,000 units (a 'standard lot'). Modern brokers also offer mini lots (10,000 = 0.10 standard), micro lots (1,000 = 0.01 standard), and nano lots (100 = 0.001 standard).

Also called: standard lot, trade size

Lot size is the most important variable a trader controls. Pick it deliberately for each trade based on account size, risk per trade, and stop distance.

MACD has three components: the MACD line (12-EMA minus 26-EMA), the signal line (9-EMA of the MACD line), and the histogram (MACD line minus signal line).

Also called: moving average convergence divergence

MACD line = EMA(12) − EMA(26)
Signal line = EMA(9) of MACD line
Histogram = MACD line − Signal line

Majors account for roughly 75% of daily FX volume. Tightest spreads, deepest liquidity, most analyst coverage. Best place for beginners to start.

Also called: major pairs

Margin is the 'down payment' your broker requires to let you control a leveraged position. With 1:100 leverage, margin = 1% of notional. With 1:30, margin = ~3.3%.

Also called: required margin

Margin = Position notional / Leverage ratio

Margin call levels vary by broker (commonly 100% or 80%). Brokers may notify by email, in-platform, or simply auto-close positions when the stop-out level is reached.

Also called: margin warning

Margin level above 1000% = comfortable. Below 200% = approach margin call territory. Below 100% = margin call. Below stop-out level (typically 20–50%) = broker auto-closes worst trades.

Also called: margin %

Margin Level = (Equity / Used Margin) × 100%

Market makers (B-book brokers) profit when clients lose. Reputable market makers run sophisticated risk-management (off-loading large exposures to A-book) and don't manipulate prices, but the model creates an inherent conflict of interest.

Also called: MM, B-book broker, dealing desk

A market order is the simplest instruction you can send to a broker: execute immediately at whatever price is available. Buy orders fill at the ask, sell orders at the bid.

Also called: market buy, market sell, at market

Mathematically guaranteed to break any finite account given a long enough losing streak. Martingale-based EAs can show smooth profits for months, then wipe out an account in a single bad week.

Maximum drawdown (Max DD) is the worst drawdown observed. It's a critical comparison metric: a strategy with 30% return and 10% Max DD is far better than one with 30% return and 40% Max DD.

Also called: max DD, MDD

Mean reversion is the philosophical opposite of trend following. Often high win rate (60–80%), modest R:R, vulnerable to fat-tail events when 'reversion' becomes a trend. Bollinger Band fades and RSI extreme reversals are classic mean-reversion plays.

Also called: counter-trend trading, fade

MT4 (MetaQuotes, 2005) became the de facto retail FX platform thanks to free licensing, broad broker support, and an enormous library of EAs and indicators.

Also called: MT4

MT5 adds: native support for stocks/futures/crypto via broker, an economic calendar, depth-of-market, more order types, partial fills, and a vastly improved strategy tester (multi-currency, multi-threaded).

Also called: MT5

Micro lots make FX accessible to accounts as small as $100. Essential for beginners who want to learn on live capital without risking serious money.

Also called: 0.01 lot

MiFID II governs everything from best-execution requirements to transaction reporting and product governance across the EU/EEA. It's the regulatory backbone CySEC, BaFin, and other EU regulators enforce.

Also called: MiFID 2

Mini lots let smaller accounts ($1,000–$10,000) trade with reasonable position sizing relative to risk. Most retail platforms allow size in 0.01 increments down to micro lots.

Also called: 0.1 lot

Minors (sometimes called 'cross majors') still have deep liquidity but wider spreads than majors. Often offer cleaner trends because they're less driven by single-currency news.

Also called: minor pairs

Mobile trading is fine for monitoring positions and emergency exits; less suited to complex order management or chart analysis. Most pros use mobile as a complement to desktop, not a replacement.

A moving average plots the average closing price of the last N candles, updated each new candle. It strips out noise and reveals the underlying trend direction.

Also called: MA

SMA(n) = (P₁ + P₂ + … + Pₙ) / n

MQL4 is a C-style language with built-in trading functions. Less strict than MQL5 (looser typing, fewer object-oriented features) but with an enormous codebase from the platform's two-decade install base.

Also called: MetaQuotes Language 4

MQL5 is closer to C++ — full OOP, namespaces, templates, generics, and a richer standard library. EAs written in MQL5 can use the much-improved multi-threaded strategy tester.

Also called: MetaQuotes Language 5

Nano lots are offered by a handful of brokers (notably cent-account brokers) for traders testing strategies on live capital with negligible risk. Mostly a demo-to-live bridge tool.

Also called: 0.001 lot

NDD is the broad category covering both pure-ECN brokers and STP brokers. Marketing differentiates them, but the practical difference for traders is usually small (commission model vs spread markup).

Also called: NDD

Without NBP, a sudden gap (e.g. the 2015 CHF flash crash) can put your account thousands of dollars negative — a debt the broker can technically demand.

Also called: NBP

News trading splits into two camps: predicting the release (very hard) and reacting to it (also hard, due to slippage and spread widening). Many brokers restrict EA activity around major news.

The NFA is the day-to-day regulator for US futures and retail FX brokers (which must also be registered with the CFTC). Membership is required for any firm offering retail FX in the US.

Also called: National Futures Association

NZD/USD ('Kiwi') is similar to AUD/USD but with smaller liquidity and slightly wider spreads. Strongly correlated with AUD; affected by RBNZ policy and global dairy prices.

Also called: NZDUSD, Kiwi

OCO ('one-cancels-other') lets you set two opposing or alternative orders that share a single allocation of risk. Most commonly used for bracket orders: place a take-profit limit and stop-loss stop on the same position — one fills, the other dies.

Also called: one cancels other, bracket order

Offshore licences let brokers serve clients globally with fewer restrictions (higher leverage, no NBP requirements). They aren't all scams — many reputable brokers maintain an offshore entity for international clients — but they don't offer the same protections as Tier-1.

Also called: offshore licence

OBV (Joe Granville, 1963) tracks the running sum of volume, flipping sign with each close. Rising OBV with rising price confirms the trend; falling OBV with rising price warns of weakness.

Also called: on balance volume

Optimization is necessary but dangerous. The more parameters you tune, the more likely you're fitting noise rather than signal. Defences: keep parameter count small, use walk-forward analysis, hold out a true out-of-sample period, and prefer parameter robustness over peak perform…

Also called: curve-fitting, over-optimization

Order flow analysis studies the actual orders entering the market — size, aggression (market vs limit), and direction — rather than just looking at price on a chart.

Also called: tape reading, DOM trading

PAMM lets investors deposit into a manager's strategy without giving up custody of their own funds. The manager trades the pool; gains and losses are allocated proportionally. Manager earns a performance fee.

Also called: PAMM

Parabolic SAR (Wilder) plots dots that flip from below price (uptrend) to above price (downtrend) as the trend reverses. The dots accelerate toward price over time, eventually triggering a 'stop and reverse'.

Also called: SAR, PSAR

A partial fill leaves the rest of your order working (or cancelled, depending on the order type — IOC cancels the remainder, GTC keeps it).

Pending orders are price-conditional instructions that wait in the broker's order book until the trigger condition is met. The four standard types are buy limit, sell limit, buy stop, and sell stop.

Pin bars are price-action's bread and butter. A long wick shows price tried and failed at a level — sellers (or buyers) rejected the move. Body should be < 1/3 of total candle length; wick on the rejection side at least 2× the body.

Also called: pinbar, rejection candle

'Pip' stands for 'point in percentage' (or 'price interest point'). On EUR/USD at 1.0800, a 1-pip move takes price to 1.0801. On USD/JPY at 150.00, a 1-pip move takes price to 150.01.

Also called: point

Pip value (USD pairs) = (0.0001 / Exchange rate) × Lot size in base currency

Pip value depends on three things: lot size, the pair's quote currency, and your account's base currency. For a USD-account trading EUR/USD: 1 standard lot = $10/pip. 1 mini lot = $1/pip. 1 micro lot = $0.10/pip.

Also called: pip cost

Pip value = (Pip size / Exchange rate) × Lot size in base currency

Pipettes appeared when brokers moved from 4-decimal pricing to 5-decimal pricing for tighter spreads. EUR/USD at 1.08001 → 1.08002 = a 1-pipette (0.1-pip) move.

Also called: fractional pip, 5-digit pricing

Pivot points generate a centre line (P) plus support (S1, S2, S3) and resistance (R1, R2, R3) levels for the current session, derived from prior-session high, low, close.

Also called: floor pivots, classic pivots

P = (High + Low + Close) / 3
R1 = 2P − Low
S1 = 2P − High
R2 = P + (High − Low)
S2 = P − (High − Low)

Position sizing is what turns a 'maybe' edge into a sustainable equity curve. Risk a fixed percent of equity (typically 0.5–2%) per trade and size each trade so the stop-loss equals that risk in dollars.

Also called: sizing, money management

Lots = (Equity × Risk%) / (Stop distance in pips × Pip value per lot)

Position traders trade weekly and monthly charts, often holding through significant drawdowns to capture multi-thousand-pip macro moves. Macro fundamentals dominate the decision process.

Also called: macro trading

Profit factor (PF) of 1.0 = breakeven. 1.5 = decent. 2.0+ = strong. Anything above 3.0 in backtests is usually curve-fit unless the sample is huge.

Also called: PF

Profit Factor = Sum of winning trades / |Sum of losing trades|

Pullbacks are the trend trader's friend: a temporary pause that flushes out weak hands before the trend resumes. Common pullback targets: prior swing high/low, 38.2/50/61.8% Fib retracements, key MAs.

Also called: retracement

The quote currency is the 'denominator' of the exchange rate. P&L on a trade is naturally in the quote currency before being converted to your account currency.

Also called: counter currency, terms currency

Range trading is profitable when most others are losing on breakouts. The challenge: knowing when the range is about to end. Combine with ADX (low = range bias) and volume to filter out emerging trends.

Also called: mean reversion intraday

RSI (Wilder, 1978) compares the average size of recent gains to the average size of recent losses. Values above 70 are conventionally 'overbought'; below 30 'oversold'.

Also called: RSI

RSI = 100 − (100 / (1 + RS))
RS = avg gain over n periods / avg loss over n periods
(default n = 14)

A requote happens when a dealing-desk broker can't (or won't) execute your order at the price you saw. Instead of filling, they pop up a new price and ask you to confirm.

Also called: price re-quote

The USD makes up ~60% of global FX reserves, followed by EUR (~20%), JPY, GBP, and increasingly CNY. Reserve status confers persistent demand for the currency and lowers its volatility versus most peers.

Resistance is the mirror of support — clusters of sell orders that have repeatedly capped advances. Strong resistance is broken by either fundamental shifts or sustained momentum.

Distinguishing reversals from pullbacks is the hardest pattern-recognition problem in trading. Confirmation usually requires multiple signals: trendline break + lower high (in an uptrend) + close below a key MA.

Risk of ruin (RoR) collapses win rate, R:R, and bet size into a single probability of going broke. Even a system with positive expectancy can have meaningful RoR if you bet too big.

Also called: RoR

Risk per trade is set as a percent of account equity (commonly 0.5–2%) and combined with stop distance to derive position size. Keeping it constant in % terms means losses shrink with your account in drawdown and grow with your account in profit — automatic compounding.

Risk-reward ratio compares the distance from entry to stop-loss (risk) against the distance from entry to take-profit (reward). A 2:1 R:R lets you be profitable at a 40% win rate; a 1:1 needs 50%+; a 0.5:1 needs 67%+.

Also called: R:R, RR, reward-to-risk

R:R = (TP price − Entry) / (Entry − SL price)  (for long positions, distance not direction)

Spread is paid once per round turn (already baked into the bid-ask gap). Commission is also conventionally quoted per round turn (e.g. '$7 per lot round-turn' = $3.50 per side).

Also called: round trip

Safe-haven flows are driven by liquidity (USD), capital repatriation (JPY), and political neutrality + financial reputation (CHF). During risk-off events, expect strength in these currencies and weakness in commodity / EM currencies.

Also called: haven currency

Scalping demands tight spreads, low commission, fast execution, and a strong stomach. Edge usually comes from execution quality (slippage, latency) and a very high win rate at low R:R.

Also called: scalp, scalper

Unlike EAs (which run continuously) and indicators (which calculate every tick), scripts execute once and exit. Common scripts: close-all, set-stop-loss-on-all-trades, place-grid-of-pending-orders.

Segregation means your deposits sit in trust accounts at top-tier banks, ring-fenced from broker creditors. If the broker goes bankrupt, segregated funds should be returnable.

Also called: segregation, client money rules

Sharpe ratio (William Sharpe, 1966) measures how much return you got per unit of volatility. Higher is better. >1 is decent, >2 is excellent, >3 is exceptional (and usually too good to be true).

Also called: Sharpe

Sharpe = (Return − Risk-free rate) / Standard deviation of returns

The shooting star is the hammer's mirror — buyers pushed price up, sellers smashed it back down to close near the open. Strong sell signal at the top of a rally, especially at resistance.

The SMA is the default 'MA' if no type is specified. It smooths price by treating every period in the window equally — which makes it more stable than the EMA but also slower to react.

Also called: simple MA

SMA(n) = Σ(closes over last n periods) / n

Slippage happens when the market moves between the moment your order is sent and the moment it's executed. It can be negative (filled worse than expected) or positive (filled better — yes, that's possible).

Also called: execution slippage

Slippage = fill price − expected price

Social trading platforms blend community features (comments, leaderboards, trade signals) with execution. eToro popularised the model; many brokers now offer their own versions.

Sortino fixes Sharpe's main weakness: it uses only the standard deviation of negative returns (downside deviation). Strategies that have big winners and small losers will look much better under Sortino than Sharpe.

Sortino = (Return − Risk-free rate) / Downside deviation

The spread is the broker's compensation for providing liquidity. Tighter spreads = lower trading costs. Spreads can be fixed (broker-defined) or variable (driven by underlying market liquidity); they typically widen during news, weekend opens, and low-liquidity sessions.

Also called: bid-ask spread, dealer spread

Spread = Ask − Bid
Spread cost ($) = Spread (pips) × Pip value × Lots

Standard accounts work for retail traders who prefer simplicity (no commission line item) over the tighter raw spreads of ECN accounts. Total cost is usually similar; the distribution between spread and commission differs.

A standard lot of EUR/USD = €100,000 notional. At a typical pip value of $10/pip, a 50-pip stop = $500 risk. Standard lots are still common on professional accounts but mini/micro lots dominate retail.

Also called: 1.0 lot

Stat arb (or 'pairs trading') in FX: long EUR/USD short GBP/USD when their correlation spikes outside the historical range. Requires careful correlation analysis and position sizing for the spread, not the legs.

Also called: stat arb, pairs trading

The stochastic asks: where is today's close inside the last N periods' high-low range? If it's near the top of the range, momentum is up; near the bottom, momentum is down.

Also called: stoch

%K = 100 × (Close − Lowest_low_n) / (Highest_high_n − Lowest_low_n)
%D = SMA(3) of %K

Stop Loss (SL) is the single most important risk-control tool in trading. It defines the worst case for a trade before you take it, and removes the emotional 'just one more pip' decision when price moves against you.

Also called: SL, stop, protective stop

Position size (lots) = Account risk ($) ÷ (Stop distance × pip value per lot)

A stop order sleeps until price touches a trigger level, then converts to a market order. Buy stops sit above current price (breakout entry); sell stops sit below (breakout entry or protective exit).

Also called: stop, stop-market, stop entry

Trigger: Buy stop fires when ask ≥ trigger price
Sell stop fires when bid ≤ trigger price

Stop-out is the last line of defence against an account going negative. Typical levels: 20% (offshore, high leverage) to 50% (Tier-1 regulated). Closes start with the worst-performing trade.

Also called: stop out level, liquidation

A stop-limit combines the trigger of a stop with the price guarantee of a limit. When price touches the stop, the broker submits a limit order at the specified limit price (which can differ from the stop).

Also called: SL order

STP brokers don't run a dealing desk but may add a small markup to the raw spread. The execution path is similar to ECN; the revenue model differs.

Also called: STP

Support is created by clusters of buy orders at psychologically or technically significant prices. The more times a level has held, the stronger it's considered — until it breaks.

When you hold a position past the 17:00 New York rollover, the broker pays or charges you the differential between the two currencies' interbank rates, minus a spread (usually negative for both sides).

Also called: rollover, overnight interest, carry

Swing trading is the natural style for traders with day jobs — analysis happens on daily or 4H charts, trades are placed and managed in minutes per day. Targets are typically multi-day moves of 100–500+ pips.

Also called: swing

Take Profit (TP) automates the exit on winning trades. Set when you open the position, it sits as a limit order on the opposite side and executes the moment price touches your target.

Also called: TP, profit target, target

Tick data is essential for scalping strategies and accurate backtesting. MT5's strategy tester runs on tick data; MT4's defaults to 1-minute candles unless you import tick data from sources like Dukascopy or Tickstory.

Tick size matters for execution: prices can only move in tick-size increments. On most FX pairs the tick size equals one pipette. On futures and other instruments it varies and is set by the exchange.

For most FX pairs on 5-digit brokers, tick value = pip value / 10. A 1.0-lot EUR/USD position has tick value ≈ $1 per pipette ($10 per pip).

Tier-1 isn't an official label — it's industry shorthand for regulators with strong enforcement, mandatory segregation, and meaningful compensation schemes. Trading with a Tier-1-regulated entity is the single biggest risk-reduction step retail traders can take.

Bots range from simple if-then rule engines to ML-driven systems. Quality varies enormously; the marketing-to-substance ratio in the retail-bot industry is notoriously high.

Also called: robot, auto-trader

Originally a charting-only service, TradingView now integrates with brokers (OANDA, FOREX.com, Pepperstone, etc.) for direct execution. Pine Script is its native scripting language for indicators and strategies.

Also called: TV

A trailing stop is a stop-loss order with a dynamic level. It moves with price in your favour but never moves against you. You define the trail distance (in pips, ticks, or %); the broker handles the rest.

Also called: trailing SL

New stop = max(old stop, current price − trail distance)  (for long positions)

Trend following is one of the oldest and most studied edges in markets. Low win rates (often 30–40%) with very high R:R (3:1, 5:1, even 10:1 on monster trades). Requires huge patience and willingness to sit through drawdowns.

Also called: trend trading, momentum trading

Trendlines need at least two touches to draw and a third to validate. They're subjective (every trader draws them slightly differently) but powerful when respected by multiple market participants.

Also called: trend line

Symmetrical triangles (converging lower-highs and higher-lows) are neutral until broken. Ascending triangles (flat top, rising lows) bias bullish. Descending triangles (flat bottom, falling highs) bias bearish.

Also called: triangle

FX settles T+2, so positions opened Wednesday settle Friday. Holding past Wednesday's rollover means the settlement date jumps to Monday, covering Wed/Thu/Fri/Sat/Sun — three swap charges.

USD/CAD is heavily inverse-correlated with WTI crude oil. Rising oil typically weakens USD/CAD; falling oil strengthens it. Both currencies share strong North American economic ties.

Also called: USDCAD, Loonie

CHF strengthens during global risk-off events (the 'safe haven' bid). Famously volatile during the SNB's 2011-2015 EUR/CHF floor experiment, which ended catastrophically in January 2015.

Also called: USDCHF, Swissie

USD/JPY is the standard yen pair and a key risk-on/risk-off barometer (yen tends to strengthen during global stress). BoJ's yield-curve-control policy makes it especially sensitive to US-Japan yield differentials.

Also called: USDJPY, Dollar Yen, Gopher

Used margin grows as you open positions and shrinks as you close them. Held constant if positions remain open, regardless of P&L.

Also called: committed margin

VaR is the institutional standard for portfolio risk. It collapses many positions into one number. Major weakness: it ignores what happens in the worst 5% — black swans break VaR.

Also called: VaR

Variable spreads reflect the actual cost of liquidity in real time. Cheaper than fixed on average, but can blow out during NFP, FOMC, or weekend opens. Standard at ECN/STP brokers.

Also called: floating spread

Volatility is measured in absolute terms (pips, dollars) or relative (%, standard deviations). It expands and contracts in cycles — quiet periods often precede explosive moves and vice versa.

Running EAs from a VPS keeps them online even if your home PC reboots or loses internet. Choosing a VPS in the same data centre as your broker (Equinix LD4 for many London brokers) can reduce execution latency from 100ms+ to single-digit ms.

Also called: forex VPS

VWAP is the running average price weighted by the volume traded at each tick. Institutions use it as an execution benchmark — fills better than VWAP are 'good', worse are 'bad'.

Also called: VWAP

VWAP = Σ(Price × Volume) / Σ(Volume)

Most brokers offer a WebTrader option (often a JavaScript wrap of their main platform). Useful for traders on locked-down work computers; limited compared to native platforms for serious automation.

Wedges differ from triangles in that both boundary lines slope in the same direction (just at different angles). Rising wedge in an uptrend = exhaustion (bearish). Falling wedge in a downtrend = exhaustion (bullish).

Also called: rising wedge, falling wedge

Williams %R (Larry Williams) is essentially an inverted, unsmoothed stochastic. Reads from 0 to −100, with > −20 = overbought, < −80 = oversold.

Also called: W%R, Williams Percent R

%R = −100 × (Highest_high_n − Close) / (Highest_high_n − Lowest_low_n)

Win rate alone says almost nothing about profitability. A 90% win rate can lose money if losses are 10× the size of wins; a 30% win rate can compound nicely if winners are 5× the losers.

Also called: hit rate, winning percentage

Win rate = Winning trades / Total closed trades

Most FX brokers offer XAU/USD with leverage similar to major pairs. Gold's drivers (real yields, USD strength, inflation expectations, geopolitical risk) overlap with FX themes — many FX traders include gold in their daily watchlists.

Also called: XAUUSD, Gold, Gold/USD

The 1% rule caps the damage from any single losing trade at 1% of equity. At 1% risk per trade, you'd need 100 consecutive losers to wipe out — statistically near-impossible for any strategy with positive expectancy.

Also called: 1% rule, two-percent rule