Absolute advantage
The ability of an organisation, central bank or government to produce a higher level of goods or services in comparison to competitors under the same circumstances.
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Forex Trading Glossary
Trade major, minor and exotic FX pairs with tight spreads and fast execution
Trading Glossary
AML
Anti Money Laundering refers to regulations and procedures put in place in order to prevent criminals from disguising illegally obtained funds.
Analysis
A detailed examination of market data to identify trends, opportunities, and risks. Often split into technical and fundamental analysis.
Bear market
A market condition where prices are generally falling and sentiment is negative.
Bid price
The price at which the market (or broker) is willing to buy a financial instrument from a trader.
CFD (Contract for Difference)
A derivative product that allows traders to speculate on price movements without owning the underlying asset.
Currency pair
The quotation of one currency against another, such as EUR/USD, indicating how much of the quote currency is needed to buy one unit of the base currency.
Drawdown
The decline from a peak in the value of an account or investment, usually expressed as a percentage.
Equity
The current value of a trading account, including open profits and losses.
Exposure
The total value at risk in the market, based on all open positions.
Fundamental analysis
A method of evaluating an asset based on economic data, news, and financial statements rather than price charts alone.
Leverage
The use of borrowed funds from a broker to open larger positions with a smaller amount of capital. Expressed as a ratio such as 1:500.
Liquidity
How easily an asset can be bought or sold in the market without causing a major change in its price.
Margin
The amount of capital required by a broker to open and maintain a leveraged position.
Pip
The smallest standardised price movement in most currency pairs, usually the fourth decimal place (0.0001).
Risk management
The process of identifying, measuring, and controlling potential losses in trading through position sizing, stop-loss orders, and diversification.
Stop-loss order
An order placed with a broker to automatically close a position when the market reaches a specified price, limiting potential loss.
Swap
A fee or credit charged for holding a position overnight, reflecting the interest rate differential between the two instruments in a trade.
Take-profit order
An order that automatically closes a position when the market reaches a specified favourable price level, locking in profit.
Volatility
The degree of price fluctuation for a financial instrument over a given period. Higher volatility means larger and more frequent price moves.
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