Trading Glossary

A plain-English trading glossary

This glossary defines the forex and trading terms beginners run into most: pip, lot, spread, leverage, margin, stop-loss, support and resistance, and more. Each definition is written in plain language so you can read a guide or a broker page without getting lost. Knowing the vocabulary will not make you profitable, but not knowing it will cost you.

See the tools and resources Start-here roadmap

Core market and pricing terms

Forex (FX) is the market for trading one currency against another. A currency pair, such as EUR/USD, quotes the value of a base currency in terms of a quote currency. The bid is the price at which you can sell and the ask is the price at which you can buy; the spread is the gap between them and is a cost you pay on every trade.

A pip is the standard smallest increment a pair usually moves in, typically the fourth decimal place of the price, and traders use it to measure movement. Liquidity describes how easily an asset can be bought or sold without moving its price; major pairs are highly liquid, which is part of why their spreads are tight.

Position, size, and leverage terms

A lot is the size of a trade: a standard lot is 100,000 units of the base currency, a mini lot is 10,000, and a micro lot is 1,000. Going long means buying in expectation of a rise; going short means selling in expectation of a fall. Leverage lets you control a position larger than your balance, and margin is the deposit the broker holds to keep that position open.

A margin call is a warning, or an automatic closure, that happens when losses erode your account below the margin the broker requires, which is one reason high leverage is dangerous. Drawdown is the drop from a peak in your account to a subsequent low, and managing it is central to surviving as a trader.

Order, risk, and analysis terms

A stop-loss is an order that closes a trade at a set price to cap a loss, and a take-profit closes it at a set price to lock in a gain. The risk-reward ratio compares the size of the potential loss to the potential gain on a trade. Position sizing is choosing how large a trade to take so the loss, if the stop is hit, stays within your planned risk.

Support is a price area where buying has tended to halt a fall, and resistance is an area where selling has tended to halt a rise. A trend is the general direction of a market over time, up, down, or sideways. A moving average is an indicator that smooths price into a line to show the broader direction. These terms recur across every guide on this site, so it is worth getting comfortable with them early.

Key points

What to understand

Spread is a per-trade cost. The bid-ask gap is paid every time you trade, so tighter spreads on major pairs cost less.
Lot size sets your risk per pip. Standard, mini, and micro lots determine how much money each pip move is worth.
Margin call means trouble. It triggers when losses erode your account below required margin, a direct danger of high leverage.
Stop-loss and take-profit are your exits. One caps a loss, the other locks a gain; both are set in advance.
Trend and levels recur everywhere. Support, resistance, and trend underpin most strategies, so learn them first.

Resources

Tools and resources for this topic

Each slot below is reserved for a broker, course, or tool consistent with the risk-first approach we teach. We add them as we vet them, mark every affiliate link clearly, and never feature anything that promises profit or sells signals.

Partner slot Beginner course

A vetted intro resource slot; disclosed affiliate or recommendation when added.

Partner slot Trading tools overview

Links to the trading-tools page on this site.

Questions

Frequently asked questions

What does pip mean in forex?

A pip is the standard smallest increment most currency pairs move in, usually the fourth decimal place of the quote price. Traders use pips to measure how far a price has moved. The money value of a pip depends on your lot size, which is why pip value and position sizing are learned together when managing risk.

What is leverage in trading?

Leverage lets you control a position larger than your account balance, with the broker holding a deposit called margin to keep it open. It magnifies both gains and losses, so while it can increase profits it can also increase losses just as fast, and is a leading reason beginners lose money. High leverage should be treated with great caution.

What is a margin call?

A margin call happens when losses reduce your account below the margin your broker requires to hold your open positions. Depending on the broker it is a warning to add funds or an automatic closing of positions to prevent further loss. Frequent margin calls are a sign of using too much leverage or too little risk control.

What does going long or short mean?

Going long means buying in the expectation that the price will rise, while going short means selling in the expectation that it will fall. In forex you are always long one currency in a pair and short the other at the same time. Neither direction is inherently safer; both carry the same need for stops and position sizing.