Forex trading terms every beginner should know
Forex sounds complicated mainly because of its vocabulary. Learn these words once and every chart, broker screen and guide becomes much easier to follow.
By the TradeFather education team · Updated 27 Oct 2026 · Educational content, not financial advice
Key takeaways
- Pips measure price movement; lots measure trade size.
- Leverage and margin decide how much exposure a small deposit controls.
- Spread, commission and swap are the costs of a trade.
- Stop-loss and take-profit are orders that close a trade automatically at your chosen prices.
Price words
Words about price
| Term | Meaning |
|---|---|
| Currency pair | Two currencies quoted against each other, e.g. EUR/USD. |
| Base / quote currency | The first currency (base) is priced in the second (quote). |
| Bid / Ask | Bid is the price you sell at; ask is the price you buy at. |
| Spread | The gap between bid and ask — a built-in trading cost. |
| Pip | Usually the 4th decimal (0.0001); the 2nd decimal for JPY pairs. |
| Pipette | A fractional pip, one-tenth of a pip. |
| Volatility | How much and how fast price moves. |
| Liquidity | How easily a pair can be traded without moving the price. |
Size & money
Words about trade size and money
| Term | Meaning |
|---|---|
| Standard lot | 100,000 units of the base currency. |
| Mini / micro lot | 10,000 / 1,000 units. |
| Leverage | Borrowed exposure, e.g. 1:100 lets $1 control $100. |
| Margin | The deposit a broker locks to keep a leveraged trade open. |
| Free margin | Money available to open new trades. |
| Margin call | A warning that your equity is close to the required margin. |
| Stop out | The broker closing trades automatically when equity falls too low. |
| Equity | Balance plus or minus open trade profit/loss. |
Orders
Words about orders
| Term | Meaning |
|---|---|
| Long / short | Buying expecting a rise / selling expecting a fall. |
| Market order | Opens immediately at the current price. |
| Limit order | Opens only at a better price you set. |
| Stop order | Opens once price breaks past a level you set. |
| Stop-loss | Closes a trade at a set loss level. |
| Take-profit | Closes a trade at a set profit level. |
| Trailing stop | A stop-loss that follows price as it moves in your favour. |
| Slippage | Getting filled at a different price than requested, common around news. |
Costs & analysis
Words about costs and analysis
| Term | Meaning |
|---|---|
| Commission | A fixed fee per lot charged by some account types. |
| Swap / rollover | Interest paid or charged for holding a trade overnight. |
| Technical analysis | Studying charts, candles and indicators. |
| Fundamental analysis | Studying interest rates, inflation and economic news. |
| Support / resistance | Price zones where buying or selling has appeared before. |
| Trend | The general direction of price: up, down or sideways. |
| Risk-reward ratio | How much you aim to make compared with what you risk. |
| Drawdown | The fall from an account's peak to its lowest point. |
FAQ
Frequently asked questions
+What is a pip in forex?
The standard unit of price movement — 0.0001 for most pairs and 0.01 for JPY pairs.
+What does lot mean in forex?
The trade size. A standard lot is 100,000 units, a mini lot 10,000 and a micro lot 1,000.
+What is the difference between leverage and margin?
Leverage is the ratio of exposure to deposit; margin is the actual money locked to keep the trade open.
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