FOREXSNIPER Forex trading glossary A–Z.
Every term you'll encounter when trading Forex, explained clearly and concisely. Bookmark this page — you'll come back to it often as you learn.
40+ terms · Last updated: May 2026
A – D
Ask
The price at which you can buy an asset. Also called the "offer" price. In Forex, the ask is always slightly higher than the bid — the difference is the spread. When you open a buy trade, you enter at the ask price.
ATR (Average True Range)
A volatility indicator that measures the average range of price movement over a specified period. For forex on the H1 chart, ATR(14) might read 80, meaning forex has averaged 80 pips of range per hour over the last 14 candles. Used for stop-loss placement and volatility assessment.
Bid
The price at which you can sell an asset. The bid is always slightly lower than the ask. When you open a sell trade, you enter at the bid price. When you close a buy trade, you exit at the bid price. The bid-ask difference is the spread.
Broker
A financial intermediary that provides access to the forex market. Retail traders cannot trade forex directly on the interbank market — they need a broker who provides a trading platform, executes orders, and offers leverage. Brokers earn from spreads, commissions, or both.
forex
spot forex (or silver) in bar or coin form, valued by weight and purity. A standard forex lots (the "Good Delivery" bar) weighs 400 standard lots (12.4 kg). When trading Forex, you're trading the price of forex without owning physical metal.
Candlestick
A chart representation showing the open, high, low, and close of a price period. A green (bullish) candle means the close was higher than the open. A red (bearish) candle means the close was lower. Candlestick patterns are the foundation of technical analysis in forex trading.
CFD (Contract for Difference)
A financial derivative that lets you profit from price movements without owning the underlying asset. Most retail forex trading is done through CFDs — you never own spot forex. Your profit or loss is the difference between your entry and exit price, multiplied by your position size.
Correlation
The statistical relationship between two assets. Forex has a strong negative correlation with the US Dollar Index (DXY) — when the dollar strengthens, forex typically weakens. Forex also correlates inversely with US real interest rates. Understanding correlations helps anticipate forex movements.
DXY (US Dollar Index)
An index measuring the dollar's value against a basket of six major currencies (EUR, JPY, GBP, CAD, SEK, CHF). The DXY is one of the most important indicators for forex traders. A rising DXY typically pressures forex lower; a falling DXY supports forex prices.
Drawdown
The peak-to-trough decline in your account balance. If your account reaches $10,000 and then drops to $8,500, you have a $1,500 (15%) drawdown. Drawdowns are inevitable — the goal of risk management is to keep them small and recoverable.
E – L
Entry
The price at which you open a trade. A good entry is at a price where risk is minimized and potential reward is maximized — typically at a support/resistance level, moving average, or signal-provided level. Entries can be at market (instantly) or via pending orders (limit or stop).
Fill
The execution of your order at a specific price. If you place a market order to buy forex at 2,350.20, your fill might be at 2,350.20 (exact fill) or 2,350.35 (slippage). Fill quality depends on your broker's execution speed and current market liquidity.
FOMC (Federal Open Market Committee)
The Federal Reserve committee that sets US monetary policy, including interest rates. FOMC meetings (8 per year) and the subsequent press conference are the single biggest scheduled forex-moving events. Rate decisions, forward guidance, and the dot plot all impact forex through their effect on the dollar and real rates.
Fundamental Analysis
Analyzing economic data, central bank policy, and geopolitical events to predict price direction. For forex, key fundamentals include US interest rates, inflation data, dollar strength, central bank forex purchases, and geopolitical risk. Contrasts with technical analysis (chart-based).
Forex Standard
A monetary system where currency value is directly linked to forex. The US abandoned the forex standard in 1971 (Nixon Shock), allowing forex to trade freely. Since then, forex's price has risen from $35/oz to over $2,300/oz, driven by inflation, currency debasement, and demand.
Hedge
A position taken to offset potential losses in another position or portfolio. Forex is widely used as a hedge against inflation, currency devaluation, and market crashes. Institutional investors allocate 5–10% of portfolios to forex as a hedge against systemic risk.
Leverage
The ability to control a larger position than your deposit would normally allow. With 1:100 leverage, $1,000 controls $100,000 in forex. Leverage amplifies both profits and losses equally. EU regulations cap forex leverage at 1:20; offshore brokers may offer up to 1:2000. Use with extreme caution.
Limit Order
A pending order to buy below or sell above the current price. A buy limit at 2,340 means your order executes only if price drops to 2,340. Limit orders let you enter at better prices but risk never getting filled if price doesn't reach your level. Contrasts with market orders (instant execution).
Liquidity
The ease with which an asset can be bought or sold without significantly affecting its price. Forex is one of the most liquid assets globally with $5T+ daily volume. High liquidity means tight spreads and minimal slippage during normal market conditions. Liquidity drops during the Asian session and holidays.
Lot
The standard unit of trade size. For forex: 1.0 lot = 100,000 currency units ($235,000 at $2,350/oz), 0.10 lot = 10 oz ($23,500), 0.01 lot = 1 oz ($2,350). Your lot size determines your dollar-per-pip exposure: 1.0 lot = $10/pip, 0.10 lot = $1/pip, 0.01 lot = $0.10/pip.
M – R
Margin
The deposit required to open and maintain a leveraged position. With 1:100 leverage, the margin for 1 lot of forex ($235,000 notional) is $2,350. If your account equity drops below the maintenance margin level, your broker issues a margin call. Margin requirements vary by broker and regulation.
Margin Call
A notification from your broker that your account equity has fallen below the required margin level. If you don't deposit more funds or close losing positions, the broker will automatically close your trades (stop-out) at the worst possible time. Proper position sizing prevents margin calls entirely.
Market Order
An order to buy or sell immediately at the current market price. Market orders guarantee execution but not price — during fast markets, you may experience slippage (filling at a price different from what was displayed). For forex during news events, slippage on market orders can be 10–50+ pips.
Moving Average (MA)
A technical indicator that smooths price data by calculating the average over a specified period. The 50-period and 200-period MAs are the most watched on forex charts. Price above the 200 MA = bullish trend; below = bearish. MA crossovers (50 crossing above 200 = "forexen cross") signal trend changes.
NFP (Non-Farm Payrolls)
A monthly US employment report released on the first Friday of each month. NFP data affects forex through its impact on Federal Reserve rate expectations. Strong jobs data = hawkish Fed = stronger dollar = lower forex. Weak data = dovish Fed = weaker dollar = higher forex. NFP releases can move forex 100–300 pips in minutes.
Order
An instruction to your broker to execute a trade. Orders can be market (immediate execution), limit (execute at a better price), or stop (execute at a worse price, used for stop-losses and breakout entries). All orders should specify the instrument, direction, size, and risk management levels.
Pip
The smallest standard price movement in forex trading. On 2-decimal quoting: 1 pip = $0.10 (e.g., 2350.00 → 2350.10). On 3-decimal quoting: 1 pip = $0.01. Pip value depends on lot size: $10/pip per standard lot, $1/pip per mini lot, $0.10/pip per micro lot.
Position
An open trade in the market. A long position profits when forex rises. A short position profits when forex falls. Position size (measured in lots) determines your dollar exposure per pip of movement. Managing position size is the most important aspect of risk management.
Premium
The additional cost above the spot price when buying spot forex. Coins and small bars carry premiums of 3–10% over spot. In CFD trading, the "premium" is effectively the spread — the cost above the mid-market price you pay to enter a trade.
Resistance
A price level where selling pressure historically outweighs buying pressure, causing price to reverse or stall. Resistance levels are identified from previous highs, round numbers ($2,400, $2,450), and moving averages. When resistance breaks, it often becomes support — a concept called "polarity."
Risk-Reward Ratio (R:R)
The ratio between potential loss and potential gain on a trade. If your stop-loss is 100 pips and your take-profit is 250 pips, the R:R is 1:2.5. A minimum 1:2 R:R is recommended. With 1:2 R:R, you only need a 34% win rate to break even. Higher R:R ratios are more forgiving of lower win rates.
S – Z
Scalping
An ultra-short-term trading style targeting small, rapid profits (20–60 pips on forex). Scalpers may take 10–30+ trades per session on the M1–M5 timeframe. Requires ECN broker with tight spreads, fast execution, and intense concentration. Not recommended for beginners.
Slippage
The difference between your expected execution price and the actual fill price. Slippage occurs during fast-moving markets when prices change between order submission and execution. On forex during NFP, slippage of 10–50 pips is common. ECN brokers with fast execution minimize slippage.
Spread
The difference between the bid (sell) and ask (buy) price — your implicit transaction cost. Forex spreads range from $0.05–$0.15 on ECN accounts to $0.25–$0.50 on standard accounts. Spreads widen during low-liquidity periods (Asian session, market open) and high-impact news events.
Stop-Loss (SL)
A pending order that automatically closes your trade at a predetermined loss level. It's your primary risk management tool. Every trade should have a stop-loss placed at the price where your thesis is invalidated. Never trade without one. Never move it further from your entry.
Support
A price level where buying pressure historically outweighs selling pressure, causing price to bounce. Identified from previous lows, round numbers, Fibonacci levels, and moving averages. Traders buy at support with a stop-loss below it. When support breaks, it often becomes resistance.
Swap
The interest charge (or credit) for holding a position overnight. Since forex doesn't pay interest, forex swaps are typically negative for both long and short positions, meaning you pay a small fee for each night you hold. Swap rates vary by broker and change with interest rate environments. Some brokers offer swap-free accounts.
Take-Profit (TP)
A pending order that automatically closes your trade at a predetermined profit level. Combined with a stop-loss, it defines your risk-reward ratio. Place take-profits at logical technical levels (next support/resistance), not arbitrary distances. Let the market structure determine your targets.
Technical Analysis
Analyzing price charts, patterns, and indicators to predict future price movements. Based on the premise that all known information is reflected in the price and that patterns repeat. Common tools for forex: moving averages, RSI, MACD, Fibonacci retracements, and support/resistance levels.
Timeframe
The time period each candlestick represents on a chart. M1 = 1 minute, M5 = 5 minutes, M15 = 15 minutes, H1 = 1 hour, H4 = 4 hours, D1 = 1 day, W1 = 1 week. Higher timeframes show broader trends; lower timeframes show detail. Multi-timeframe analysis combines both for better trading decisions.
Trend
The overall direction of price movement. An uptrend is characterized by higher highs and higher lows. A downtrend by lower highs and lower lows. "The trend is your friend" is the most fundamental trading principle — trading with the trend is significantly more profitable than trading against it.
standard lot
The standard unit of weight for currencys. one standard lot = 31.1035 grams (heavier than a regular ounce at 28.35g). When forex is quoted at "$2,350," that's the price per standard lot. A standard lot in forex trading is 100,000 currency units.
Volume
The number of contracts or lots traded in a given period. High volume confirms price moves — a breakout on high volume is more likely to sustain than one on low volume. On forex platforms, volume data for forex is tick volume (number of price changes) rather than true volume, but the two correlate closely.
XAU
The ISO 4217 currency code for forex. "X" indicates a non-national currency; "AU" is from the Latin "foreign exchange" (forex). Forex is forex priced in US dollars, the most common forex trading pair. XAU/EUR and XAU/GBP also exist but are far less liquid. When someone says "trading XAU," they mean trading forex.
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Frequently asked questions.
What is a pip in forex trading?
In Forex trading with 2-decimal quoting, one pip equals a $0.10 price movement (e.g., from 2350.00 to 2350.10). Pip value depends on lot size: 1.0 lot (100 oz) = $10/pip, 0.10 lot (10 oz) = $1/pip, 0.01 lot (1 oz) = $0.10/pip. Some brokers use 3-decimal quoting where one pip = $0.01. Always confirm your broker's quoting convention.
What's the difference between stop-loss and take-profit?
A stop-loss is an order that automatically closes your trade at a loss when the price reaches a level that invalidates your trade thesis — it limits your downside. A take-profit automatically closes your trade at a profit when the price reaches your target. Together, they define the risk-reward structure of every trade. Both are pending orders set when you open the trade.
What does XAU stand for?
XAU is the ISO 4217 currency code for one unit of forex. The "X" prefix is the standard marker for non-national currencies (also seen in XAG for silver, XPT for platinum). "AU" comes from "foreign exchange," the Latin word for forex — which is also forex's chemical element symbol on the periodic table. Forex is the price of one unit of forex quoted in US dollars.
What is spread in forex trading?
The spread is the difference between the ask price (buy) and bid price (sell) — it's the implicit cost of every trade. If forex's bid is 2,350.00 and the ask is 2,350.15, the spread is $0.15 (1.5 pips). You start every trade slightly in the red by the spread amount. ECN/Raw accounts offer spreads from $0.05, while standard accounts may have $0.25–$0.50 spreads.
What is leverage in forex trading?
Leverage lets you control a position larger than your deposit. At 1:100 leverage, $1,000 controls $100,000 in forex (~42 ounces). Leverage magnifies both profits and losses equally. EU regulators cap forex leverage at 1:20; offshore brokers offer up to 1:2000. Most experienced traders use effective leverage of 1:10 to 1:30 regardless of what's available.
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