Sheet 06 · The Lexicon
Every word traders use, in plain English.
Search or jump by letter. Where a term is covered in the Syllabus, the definition links straight to the lesson.
A
- Ask
- The price at which you can buy a currency pair. Always slightly higher than the bid.lesson →
B
- Base currency
- The first currency in a pair — the one being bought or sold. In EUR/USD, it's the euro.lesson →
- Bear / bearish
- Expecting prices to fall. A bear market is a sustained decline.
- Bid
- The price at which you can sell a currency pair.lesson →
- Breakout
- A decisive move through a support or resistance level, often with increased momentum.lesson →
- Bull / bullish
- Expecting prices to rise. A bull market is a sustained advance.
C
- Cable
- Trader slang for GBP/USD, named after the transatlantic telegraph cable that once carried the rate.
- Carry trade
- Borrowing in a low-interest currency to hold a higher-interest one, earning the rate difference.
- Catalyst
- A scheduled or unscheduled event — data release, central bank decision, headline — that can move prices.lesson →
- Central bank
- The institution that sets a country's interest rates and manages its currency, e.g. the Fed, ECB, BoE, BoJ.
- CFD
- Contract for difference: a leveraged derivative that tracks a price without owning the underlying asset.
- Correlation
- How closely two pairs move together. EUR/USD and GBP/USD are often positively correlated.
- Cross
- A pair that doesn't include the US dollar, such as EUR/GBP or AUD/JPY.
D
- Drawdown
- The decline from an account's peak to its lowest point before a new peak.
E
- Equity
- Your account balance plus or minus the floating profit or loss of open positions.
- Exotic pair
- A major currency paired with a less-traded one (e.g. USD/TRY). Wider spreads, more volatility.
F
- Fundamental analysis
- Studying economic data, interest rates and policy to judge a currency's value.lesson →
G
- Gap
- A jump in price with no trading in between, most common at the weekly open.
H
- Hedging
- Opening a position designed to offset risk in another.
L
- Leverage
- Controlling a large position with a smaller deposit. Magnifies both gains and losses.lesson →
- Limit order
- An order to buy below or sell above the current price.lesson →
- Liquidity
- How easily a pair can be traded without moving its price. High liquidity means tight spreads.
- Long
- A buy position that profits if the price rises.
- Lot
- A standard unit of position size. 1 standard lot = 100,000 units; mini = 10,000; micro = 1,000.lesson →
M
- Major pair
- The most-traded pairs, all including USD: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, NZD/USD.
- Margin
- The collateral set aside to keep a leveraged position open.lesson →
- Margin call
- A warning that your equity has fallen close to the margin required; positions may be closed.lesson →
- Market order
- An order to buy or sell immediately at the best available price.lesson →
N
- NFP
- Non-Farm Payrolls: the monthly US jobs report, one of the most market-moving releases.
P
Q
- Quote currency
- The second currency in a pair — what the base is priced in.lesson →
R
- Resistance
- A price zone where rising prices have repeatedly stalled.lesson →
- Risk–reward ratio
- Potential profit divided by potential loss on a trade, e.g. a 50-pip target with a 25-pip stop is 2:1.
S
- Session
- The trading hours of a major centre — Sydney, Tokyo, London or New York.lesson →
- Short
- A sell position that profits if the price falls.
- Slippage
- Being filled at a different price than requested, common in fast markets.lesson →
- Spread
- The difference between the bid and ask; the built-in cost of a trade.lesson →
- Stop-loss
- An order that closes a losing position at a chosen level to cap the loss.lesson →
- Support
- A price zone where falling prices have repeatedly bounced.lesson →
- Swap
- Overnight interest paid or earned for holding a position past the daily rollover.
T
V
- Volatility
- How much and how fast a price moves. Higher volatility means bigger swings.