Trading glossary
The terms you meet in MetaTrader 4 and in our documents, explained in one line.
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- Ask
- The price at which you can buy an instrument. It is always higher than the bid: the difference is the spread.
- Balance
- The money in the account, not counting open positions.
- Base and quote currency
- In EUR/USD the euro is the base currency and the dollar the quote currency: the price shows how many dollars one euro is worth.
- Bid
- The price at which you can sell an instrument.
- CFD (contract for difference)
- A contract that tracks the price change of an underlying asset without you owning it; you gain or lose the difference between opening and closing.
- Commission
- A fixed or per-lot cost charged on some instruments, on top of the spread.
- Demo account
- An account with virtual money and real prices, for risk-free practice.
- Drawdown
- The fall of an account from its peak to its lowest value over a period.
- Equity
- The current value of the account: balance plus or minus the profit and loss of open positions.
- Expert Advisor (EA)
- A MetaTrader 4 program that runs a trading strategy automatically.
- Free margin
- Equity minus used margin: what is left for new positions or to absorb losses.
- Gap
- A jump in price between one quote and the next, typical at the open after a weekend or major news.
- Hedging
- Opening opposite positions on the same or correlated instruments to reduce exposure.
- Leverage
- The ratio between position size and required margin, for example 1:30. It magnifies gains and losses.
- Liquidity
- How easily an instrument can be bought or sold without moving its price too much.
- Long position
- A buy position: it gains if the price rises.
- Lot
- The unit of position size. In forex one standard lot equals 100,000 units of the base currency.
- Margin
- The part of your capital set aside to keep a leveraged position open.
- Margin call
- A warning that the margin level has fallen below a threshold: you need to reduce positions or add funds.
- Margin level
- Equity divided by used margin, as a percentage. When it falls too low, warnings and automatic close-outs kick in.
- Market order
- An order filled immediately at the best available price.
- Negative balance protection
- A rule that prevents a retail client from losing more than the money in the account.
- Pending order
- An order that activates only when the price reaches a set level (Buy/Sell Limit, Buy/Sell Stop).
- Pip
- The conventional smallest change in an exchange rate: usually the fourth decimal place (the second for the yen).
- Rollover
- The switch from one trading day to the next, when swaps are applied.
- Short position
- A sell position: it gains if the price falls.
- Slippage
- The difference between the requested price and the fill price, common in fast markets.
- Spread
- The difference between ask and bid: the main cost of every trade.
- Stop loss
- An order that closes the position when the loss reaches your chosen level.
- Stop out
- Automatic closing of positions when the margin level falls below the minimum threshold.
- Swap
- The financing cost or credit for positions held open past rollover.
- Take profit
- An order that closes the position when profit reaches your chosen level.
- Trailing stop
- A stop loss that moves automatically as the price moves in your favour.
- Underlying
- The asset a CFD refers to: a currency, an index, a share, a commodity.
- Volatility
- How widely and quickly an instrument's price moves.