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Trading glossary from A to Z
The 80 terms you will meet most often when trading: from spread and pip to stop-out, drawdown or KYC. Short, neutral definitions, with links to the guides that explain them in depth.
Showing 80 of 80 terms
- AML (anti-money laundering)
- The set of rules and controls designed to prevent money laundering and terrorist financing. It includes customer verification, transaction monitoring and evidence of the source of funds when required.
- Guide: How to open your account and verify your identity (KYC), step by step AML and KYC guidelines
- Ask (buy price)
- The price at which you can buy an instrument at a given moment. It is always equal to or higher than the bid, and the difference between the two is the spread.
- Guide: Spread and commission: the real cost of trading
- ATR (Average True Range)
- An indicator that measures an instrument’s average volatility over a number of periods, without indicating direction. It is often used to place stops and size positions.
- Guide: Volatility: what it is and how the ATR measures it
- Backtesting
- Testing a strategy on historical data to see how it would have performed. It helps rule ideas out, but past performance does not guarantee future results.
- Guide: Algorithmic trading: Expert Advisors on MetaTrader 5
- Balance
- The money in the account excluding the result of open positions. It changes only when trades are closed, when you deposit or withdraw, and when costs such as swap or commissions are applied.
- Guide: Leverage and margin explained
- Base currency
- The first currency in a pair (EUR in EUR/USD). It is the one you buy or sell, and the lot size is expressed in it.
- Guide: What is Forex and how does the currency market work?
- Bid (sell price)
- The price at which you can sell an instrument at a given moment. Buy positions are closed at the bid and sell positions are opened at it.
- Guide: Spread and commission: the real cost of trading
- Boost X
- A family of VexPro real-money accounts whose balance is multiplied on purchase: up to ×12 on Boost X12 and up to ×24 on Boost X24, with 1:33 leverage and a static drawdown of 10% and 5% of the total account amount. Not to be confused with Vex Funded’s Accounts X12.
- Boost X accounts
- Candlestick
- A chart representation of price over a period showing the open, close, high and low. The body shows whether the period closed up or down.
- Guide: How to read a Japanese candlestick chart
- Cent account
- An account whose balance is expressed in cents, so each trade carries a smaller monetary exposure. At VexPro it opens from $50, with no commission and spreads from 1.5 pips, and does not include the deposit bonus.
- Guide: ECN vs STP vs Cent: which account suits your capital Cent account
- Central bank
- The institution that sets monetary policy for a country or area, such as the Federal Reserve or the ECB. Its interest-rate decisions are among the biggest drivers of currencies.
- Guide: What really moves the price of a currency
- CFD (contract for difference)
- A contract that tracks the price change of an underlying asset without you owning it. It lets you trade rising and falling prices with leverage, which amplifies gains and losses.
- Markets
- Commission
- An explicit cost charged by the broker per trade or per lot, on top of the spread. To compare accounts, add spread and commission together in a single per-lot calculation.
- Guide: Spread and commission: the real cost of trading
- Commodities
- Raw goods such as gold, silver, oil or natural gas. In trading they are usually traded as CFDs, and their price responds to supply, demand and the macroeconomic backdrop.
- Commodities
- Copy trading
- A service that automatically replicates another trader’s trades in your account, in proportion to your capital. Copying does not remove risk: the copied trader’s losses also carry over to your account.
- Social trading
- Cross pairs
- Pairs of leading currencies that do not include the US dollar, such as EUR/GBP or EUR/JPY.
- Guide: What is Forex and how does the currency market work?
- Currency pair
- The quote of one currency against another, such as EUR/USD. It shows how many units of the second currency are needed to buy one unit of the first.
- Guide: What is Forex and how does the currency market work? Forex
- Day trading
- A style in which positions are opened and closed within the same day, never held overnight. It avoids swap and overnight gap risk.
- Guide: Forex market sessions: the trader’s time map
- Demo account
- An account with virtual funds that mirrors market conditions with no financial risk. It is useful for learning the platform and testing a strategy, although it does not reproduce the emotional pressure of trading real money.
- Guide: How to choose your first trading account
- Depth of Market (DOM)
- A window showing the prices and volumes available at each level above and below the current price. MetaTrader 5 includes it natively.
- Guide: Order flow and volume: real supply and demand
- Drawdown
- The fall in capital from a peak to a subsequent low, expressed in money or as a percentage. It measures how much an account or a strategy lost before recovering.
- Guide: Advanced risk management: correlation and drawdown
- ECN account
- An account where the cost is split between a very tight spread and an explicit per-lot commission. At VexPro: spreads from 0.0 pips, a $10 commission per lot round turn and a $100 minimum deposit.
- Guide: ECN vs STP vs Cent: which account suits your capital Account types
- Economic calendar
- A schedule of macroeconomic releases and central-bank decisions, with their time and expected impact. It helps you anticipate the most volatile moments.
- Guide: Fundamental analysis: what moves currencies
- Equity
- The real value of the account at any moment: the balance plus or minus the floating profit and loss of open positions. It is the basis for the margin level and for drawdown limits.
- Guide: Leverage and margin explained
- Exotic pairs
- Pairs that combine a major currency with that of an emerging or smaller economy, such as USD/MXN. They tend to have less liquidity, wider spreads and higher volatility.
- Guide: What is Forex and how does the currency market work?
- Expert Advisor (EA)
- A program that trades automatically in MetaTrader following rules defined by the trader. On MT5 they are written in the MQL5 language.
- Guide: Algorithmic trading: Expert Advisors on MetaTrader 5
- Fibonacci retracement
- A tool that draws percentage levels (23.6%, 38.2%, 50%, 61.8%…) between a high and a low to estimate possible price retracement zones.
- Guide: Support and resistance: the market’s key levels
- Free margin
- Available equity that is not committed as margin and that you can use to open new positions or absorb floating losses. It is calculated as equity minus used margin.
- Guide: Leverage and margin explained
- Fundamental analysis
- The study of the economic, monetary and political factors that influence an asset’s value, such as interest rates, inflation or employment.
- Guide: Fundamental analysis: what moves currencies
- Gap
- A jump in price between two consecutive quotes with no trading in between, typical at the Monday reopen or after news. Pending orders and stops may be filled at the first available price after the gap.
- Guide: Slippage, gaps and liquidity: your execution price
- Hedging
- A strategy that opens an opposite or correlated position to reduce the risk of another. In the Vex Funded programmes, hedging across multiple accounts is prohibited.
- Guide: Advanced risk management: correlation and drawdown
- High-water mark
- The highest value an account has reached. With a dynamic (trailing) drawdown, as in the Vex Funded programmes, the loss limit is recalculated from that peak rather than from the initial balance.
- Guide: Prop firm: how to pass the Vex Funded evaluation
- Introducing Broker (IB)
- A partner who introduces clients to a broker and is paid for doing so. At VexPro, the “sponsor” field at sign-up is where you name the IB who introduced you.
- KYC (Know Your Customer)
- The customer identity verification process required by anti-money-laundering rules. At VexPro it has 4 levels (0 registration; 1 identity and address; 2 liveness check and AML; 3 source of funds), verified through DIDIT.
- Guide: How to open your account and verify your identity (KYC), step by step AML and KYC guidelines
- Leverage
- A mechanism that lets you open positions larger than your deposited capital by putting up only a margin. It amplifies both gains and losses. At VexPro it goes up to 1:500 on ECN, STP and Cent accounts and up to 1:1000 on Synthetics.
- Guide: Leverage and margin explained Account types
- Limit order
- A pending order to buy below or sell above the current price (Buy Limit and Sell Limit). It is executed only if the price reaches the set level or a better one.
- Guide: Order types in trading: a practical guide
- Liquidity
- How easily an instrument can be bought or sold without moving its price much. Higher liquidity means tighter spreads and less slippage.
- Guide: Slippage, gaps and liquidity: your execution price
- Liquidity provider (LP)
- An institution that supplies buy and sell prices and acts as counterparty to a broker’s orders. In VEX GROUP, Exura Prime Ltd., regulated by the FSC of Mauritius, acts as liquidity provider.
- Execution model
- Long position
- A buy trade that gains value if the price rises. It is opened at the ask and closed at the bid.
- Guide: Order types in trading: a practical guide
- Lot
- The unit used to measure trade size. In Forex, a standard lot is 100,000 units of the base currency, a mini lot is 0.1 and a micro lot is 0.01 lots.
- Guide: Risk management: stop loss and position sizing
- MACD
- A trend and momentum indicator based on the difference between two exponential moving averages and its signal line. Its crossovers and divergences are used to spot shifts in momentum.
- Guide: Essential indicators: moving averages, RSI, and MACD
- Major pairs
- Currency pairs that include the US dollar against other leading currencies, such as EUR/USD, USD/JPY or GBP/USD. They are usually the most liquid, with the tightest spreads.
- Guide: What is Forex and how does the currency market work? Forex
- Margin
- The part of the account’s capital set aside as collateral to keep leveraged positions open. The higher the leverage, the lower the margin required per trade.
- Guide: Leverage and margin explained
- Margin call
- A warning issued by the platform when the margin level falls below a set threshold. It signals that the account is nearing the stop-out and that you should reduce positions or add funds.
- Guide: Leverage and margin explained
- Margin level
- The ratio between equity and used margin, expressed as a percentage (equity ÷ margin × 100). It is the figure the platform monitors to issue warnings and trigger the stop-out.
- Guide: Leverage and margin explained
- Market order
- An order executed immediately at the best available price. It guarantees execution but not the exact price, which can vary because of slippage.
- Guide: Order types in trading: a practical guide
- Market session
- The time window when the major financial centres (Sydney, Tokyo, London and New York) are open. Liquidity and volatility change by session and peak during the London–New York overlap.
- Guide: Forex market sessions: the trader’s time map
- MetaTrader 5 (MT5)
- A multi-asset trading platform developed by MetaQuotes, with 21 timeframes, depth of market, an economic calendar and automated trading in MQL5. VexPro runs exclusively on MT5, on web, Windows, iOS and Android.
- Guide: MT5 vs MT4: why VexPro runs only on MetaTrader 5 MetaTrader 5
- Moving average
- An indicator that averages the price over recent periods to smooth out noise and show the trend. The most common are the simple (SMA) and exponential (EMA) moving averages.
- Guide: Essential indicators: moving averages, RSI, and MACD
- NFP (Non-Farm Payrolls)
- A monthly US employment report measuring job creation outside the farm sector. It is one of the most volatile events on the calendar.
- Guide: Fundamental analysis: what moves currencies
- PAMM and MAM
- Systems in which a manager trades several accounts at once: in PAMM, results are shared in proportion to each account’s capital, and in MAM the manager allocates volume to each one. VexPro offers Copy Trading, MAM and PAMM.
- Social trading
- Pip
- The standard unit of price movement in Forex. In most pairs it is the fourth decimal place (0.0001); in pairs with the Japanese yen, the second decimal place (0.01).
- Guide: What is a pip and how is its value calculated?
- Pip value
- The amount of money a position gains or loses for each pip of movement. It depends on the pair and the trade size: on one standard lot of EUR/USD it is roughly $10.
- Guide: What is a pip and how is its value calculated?
- Position size
- The volume of a trade, usually in lots. It is calculated from the capital you are prepared to risk and the distance to the stop loss, not the other way round.
- Guide: Risk management: stop loss and position sizing
- Prop firm
- A proprietary trading firm that offers evaluation accounts with targets and risk limits, and pays rewards to traders who meet them. Conditions vary widely between firms, so it is worth reading their terms.
- Guide: Prop firm: how to pass the Vex Funded evaluation Vex Funded
- Quote currency
- The second currency in a pair (USD in EUR/USD). The pair’s price and the trade result are expressed in it before being converted into your account currency.
- Guide: What is Forex and how does the currency market work?
- Resistance
- A price zone where supply has halted previous rallies. If it is clearly broken, it often turns into support.
- Guide: Support and resistance: the market’s key levels
- Risk-reward ratio
- A comparison between what you risk on a trade (distance to the stop loss) and what you aim to gain (distance to the take profit). A 1:2 ratio means risking 1 to try to make 2.
- Guide: Risk management: stop loss and position sizing
- RSI (Relative Strength Index)
- An oscillator between 0 and 100 that measures the strength of recent moves. Readings above 70 or below 30 are often read as overbought or oversold.
- Guide: Essential indicators: moving averages, RSI, and MACD
- Scalping
- A trading style that seeks small profits through many very short trades. It is highly sensitive to spread, commission and execution speed.
- Guide: Spread and commission: the real cost of trading
- Short position
- A sell trade that gains value if the price falls. With CFDs you can open it without owning the asset; it is opened at the bid and closed at the ask.
- Guide: Order types in trading: a practical guide
- Slippage
- The difference between the requested price and the price at which an order is actually executed. It is more common in thin liquidity or around news and can work for or against you.
- Guide: Slippage, gaps and liquidity: your execution price
- Spread
- The difference between an instrument’s buy (ask) and sell (bid) price. It is an implicit cost of every trade and varies with liquidity, which is why brokers publish spreads “from” a minimum rather than fixed.
- Guide: Spread and commission: the real cost of trading
- Stock index
- A benchmark that tracks the combined performance of a group of shares, such as the S&P 500 or the DAX. Trading an index CFD lets you take a position on a whole market in a single trade.
- Indices
- Stop loss
- An order that automatically closes a position when the price reaches a loss level set in advance. It caps the loss on each trade, although in a gap the execution price can be worse.
- Guide: Risk management: stop loss and position sizing
- Stop order
- A pending order to buy above or sell below the current price (Buy Stop and Sell Stop), commonly used to enter breakouts. MetaTrader 5 adds the stop-limit order, which places a limit order once triggered.
- Guide: Order types in trading: a practical guide
- Stop-out
- The margin level at which the platform closes positions automatically because equity no longer covers the required margin. At VexPro the stop-out level is set at 80%.
- Guide: Leverage and margin explained Account types
- STP account
- An account where orders are passed to liquidity providers and the cost is built into the spread, with no separate commission. At VexPro: spreads from 1.0 pip, no commission and a $50 minimum deposit.
- Guide: ECN vs STP vs Cent: which account suits your capital Account types
- Support
- A price zone where demand has halted previous declines. If it breaks clearly, it often turns into resistance.
- Guide: Support and resistance: the market’s key levels
- Swap
- A financing adjustment applied to positions held open from one day to the next. It depends on the interest-rate differential between the two currencies and can be a charge or a credit.
- Guide: The swap: what overnight financing costs are
- Swap-free account
- An account type, also called an Islamic account, that does not apply swap to overnight positions. VexPro does not offer swap-free or Islamic accounts.
- Guide: The swap: what overnight financing costs are
- Swing trading
- A style that holds positions from several days to a few weeks to capture intermediate price swings. It has to account for swap and weekend gaps.
- Guide: The swap: what overnight financing costs are
- Synthetic indices
- Instruments that simulate market behaviour with a defined volatility through a model, rather than tracking a real asset. They trade 24/7 and do not react to economic news; at VexPro they are traded on the Synthetics account.
- Synthetic indices
- Take profit
- An order that automatically closes a position when the price reaches a profit target set in advance.
- Guide: Order types in trading: a practical guide
- Technical analysis
- The study of price and volume on charts, using patterns and indicators, to identify trends and possible entry and exit points.
- Guide: How to read a Japanese candlestick chart
- Timeframe
- The time interval represented by each candle or bar on a chart, from 1 minute to 1 month. MetaTrader 5 offers 21 timeframes.
- Guide: How to read a Japanese candlestick chart
- Trailing stop
- A stop loss that moves in the trade’s favour as the price advances, keeping a fixed distance. It locks in part of the accumulated profit without closing the position too early.
- Guide: Order types in trading: a practical guide
- Trend
- The prevailing direction of price over a period: up (rising highs and lows), down (falling highs and lows) or sideways. It depends on the timeframe you are looking at.
- Guide: Essential indicators: moving averages, RSI, and MACD
- Vex Funded
- VexPro’s prop firm: simulated evaluation accounts on MetaTrader 5 with performance-based rewards, across four programmes (Vex Instant, Vex2Pro, Vex Elite and Accounts X12). No real capital is allocated to the account: the account size is a notional balance.
- Guide: Prop firm: how to pass the Vex Funded evaluation Vex Funded
- Volatility
- How strongly and how quickly an instrument’s price changes. High volatility offers more movement but also increases risk.
- Guide: Volatility: what it is and how the ATR measures it
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These definitions are for information only and do not constitute investment advice. The VexPro conditions quoted are those published on this site and may change; the legal terms always prevail. Trading leveraged instruments carries a high risk of loss and may not be suitable for all investors.
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