80+ essential forex terms explained clearly. Perfect for beginners learning the language of forex trading.
The price at which you can buy a currency pair. Always slightly higher than the bid price.
Slang for AUDUSD (Australian Dollar / US Dollar).
An indicator measuring market volatility by averaging the true range over a set period.
Testing a trading strategy on historical data to evaluate its past performance before trading live. FXAbsolute specializes in manual backtesting.
Replaying historical price data bar-by-bar to simulate real-time trading. A core feature of FXAbsolute.
The first currency in a pair (e.g., GBP in GBPUSD). You buy/sell the base currency.
A market in a sustained downtrend, characterized by lower highs and lower lows.
The price at which you can sell a currency pair. Always slightly lower than the ask price.
When price moves beyond a defined support or resistance level with increased momentum.
A company that executes buy and sell orders for forex traders, typically earning from spreads or commissions.
A market in a sustained uptrend, characterized by higher highs and higher lows.
Slang for GBPUSD — the most traded forex pair for intraday traders.
A visual representation of price movement showing open, high, low, and close (OHLC) for a given time period.
A strategy of borrowing in a low-interest-rate currency to invest in a higher-yielding one, profiting from the interest rate differential.
A derivative that lets traders speculate on price movements without owning the underlying asset.
The statistical relationship between two currency pairs. Positive correlation means they move together; negative means they move opposite.
The quotation of two currencies — for example, EURUSD shows how many USD one EUR buys.
Opening and closing trades within a single trading day. No positions held overnight.
A practice trading account with virtual money. FXAbsolute is a free alternative to demo accounts — practice on real historical data instead.
The peak-to-trough decline in account equity during a trading period, expressed as a percentage. A key risk metric.
An order to enter a trade at a specified price, triggered automatically when reached.
The current value of a trading account (balance + unrealized P&L from open positions).
The average amount you can expect to win or lose per trade, calculated using win rate and risk-reward ratio.
A currency pair consisting of one major currency and one emerging-market currency (e.g., USDTRY, USDZAR).
A technical analysis tool using horizontal lines to indicate potential support/resistance at key Fibonacci levels (23.6%, 38.2%, 50%, 61.8%).
The US Federal Reserve committee that sets monetary policy. Their decisions heavily impact USD pairs.
Foreign Exchange — the global decentralized market for trading currencies. The largest financial market at $7.5+ trillion daily volume.
Evaluating currencies based on economic indicators, interest rates, GDP, employment data, and geopolitical events.
When price jumps from one level to another without trading in between. Common after weekends or major news events.
The most traded precious metal pair — gold prices in US dollars. Available on FXAbsolute for both backtesting and competitions.
Buying a currency pair with the expectation that the price will rise.
Selling a currency pair with the expectation that the price will fall.
Opening a position to offset potential losses in another position. Reduces risk but also reduces potential profit.
Algorithmic trading that executes large numbers of orders in fractions of a second.
A basket of stocks — e.g., S&P 500, NASDAQ. Increasingly available on backtesting platforms alongside forex pairs.
Trading within a single day. Positions are opened and closed within 24 hours.
The third most traded currency globally. USDJPY is a popular free pair on FXAbsolute.
Borrowed capital from a broker that allows you to control a larger position size than your account balance. Amplifies both gains and losses.
How easily an asset can be bought or sold without affecting price. Forex is the most liquid market globally.
A buy position — you profit when the base currency rises relative to the quote currency.
A standardized unit for forex trade volume. Standard lot = 100,000 units, mini = 10,000, micro = 1,000.
The most traded currency pairs, all involving USD: EURUSD, GBPUSD, USDJPY, USDCHF, AUDUSD, NZDUSD, USDCAD.
The amount of money needed in your account to open a leveraged position.
A broker's demand for additional funds when your account equity falls below the required margin level.
An order to buy or sell immediately at the current market price.
The most popular forex trading platforms. FXAbsolute is a free browser-based alternative that doesn't require MT4/MT5 installation.
A key monthly US employment report. The most volatile recurring news event for USD pairs.
Open, High, Low, Close — the four price points that define a candlestick.
A concept from ICT/SMC trading: a consolidation zone where institutions accumulated orders before a significant move.
The smallest standardized price movement. For most pairs: 0.0001. For JPY pairs: 0.01.
1/10th of a pip (0.00001 for most pairs). Used by brokers offering fractional pip pricing.
Determining the correct trade volume (lot size) based on account balance and risk per trade.
A long-term trading style where positions are held for weeks or months.
Trading based on raw price movements and candlestick patterns, without relying heavily on indicators.
Gross profit ÷ gross loss. Above 1.0 = net profitable. Above 2.0 = excellent. A key competition metric on FXAbsolute.
A proprietary trading firm (like FTMO) that funds traders who pass evaluation challenges. FXAbsolute is a free way to practice for prop firm evaluations.
The second currency in a pair (e.g., USD in GBPUSD). The price shows how much of the quote currency you need to buy one unit of the base.
A market condition where price oscillates between consistent support and resistance levels without trending.
A price level where selling pressure historically overcomes buying pressure, causing price to reverse or stall.
The practice of controlling potential losses through position sizing, stop losses, and drawdown limits.
The ratio of potential profit to potential loss. A 2:1 RR means risking $1 to make $2.
The interest paid or earned for holding a position overnight, based on the interest rate differential between two currencies.
A high-frequency trading style aiming for small, quick profits (5-15 pips per trade) with very short holding times.
A sell position — you profit when the base currency falls relative to the quote currency.
The difference between the expected price of a trade and the actual executed price, often during high volatility.
A trading methodology focused on tracking institutional order flow, popularized by ICT.
The difference between bid and ask price, measured in pips. Tighter spreads = lower trading costs.
A pre-set order to close a trade at a specified loss level, limiting maximum risk per trade.
A price level where buying pressure historically overcomes selling pressure, causing price to reverse or stall.
A medium-term trading style holding positions for several days to weeks, targeting larger price swings.
A pre-set order to close a trade at a specified profit level, locking in gains automatically.
Evaluating currencies based on historical price patterns, indicators, support/resistance, and chart analysis.
A detailed log of every trade — entry, exit, reason, mood, P&L. Essential for performance improvement. FXAbsolute has built-in journaling.
A straight line drawn on a chart connecting two or more price points, used to identify trend direction and potential reversal points.
The degree of price variation over time. High volatility = large price swings. Low volatility = narrow ranges.
The number of units traded in a given period. Higher volume indicates stronger market participation.
The percentage of trades that close in profit. Must be considered alongside risk-reward ratio — a 40% win rate with 3:1 RR is profitable. A 60% win rate with 1:1 RR is not.
A sharp price reversal that triggers stop losses before continuing in the original direction. Common in choppy markets.
The symbol for Gold vs US Dollar. Available on FXAbsolute for both backtesting and free competition. One of the most volatile instruments for traders.