Glossary
Short definitions for words the rest of the site uses. They are educational, not instructions.
- Bid
- The price at which the market is willing to buy from you. You sell at the bid.
- Ask
- The price at which the market is willing to sell to you. You buy at the ask.
- Spread
- The gap between the bid and the ask. A wider spread means a higher cost to enter and exit, before any separate commission.
- Pip
- A standard unit of movement in a forex price, often the fourth decimal place in a pair such as euro versus dollar. The cash value of a pip depends on the pair and the position size.
- Leverage
- Borrowing exposure so a small amount of margin controls a larger position. Gains and losses are both magnified. You can lose more than the margin you posted if the product allows it.
- Margin
- Collateral set aside to support a position. If losses consume it, the position may be reduced or closed.
- Candlestick
- A chart mark showing the open, high, low, and close of a period. The body is the open-to-close range. The wicks are the extremes. Colour alone is not the signal: read the prices and the direction marker together.
- Drawdown
- The fall from a peak in account value to a later trough, before a new peak. It describes pain already taken, not a forecast.
- Paper trading
- Practice with virtual funds. No order reaches a venue, and no profit is withdrawable.
- Volatility
- How widely a price moves. Higher volatility means larger swings in both directions, not a promise of higher return.
- Long and short
- A long position profits if the price rises. A short position profits if the price falls, and can lose without a ceiling if the price keeps rising.
- Liquidity
- How easily a position can be opened or closed near the last price. Thin liquidity means jumps and a wider spread.