Forex has a language of its own, and nothing slows a beginner down more than tripping over unfamiliar words. This is your complete pocket dictionary — the essential terms of currency trading, from A to Z, each explained in plain English. Bookmark it and refer back whenever a term trips you up.
A
Ask price. The price at which you can buy a currency pair. It's the higher of the two quoted prices.
Analysis (technical vs fundamental). Technical analysis studies price charts and patterns; fundamental analysis studies economic data like interest rates and inflation. Most traders use a blend.
B
Base currency. The first currency in a pair (the EUR in EUR/USD). It's the one you're buying or selling.
Bid price. The price at which you can sell. It's the lower of the two quoted prices.
Bid-ask spread. The gap between the bid and ask — a core cost of every trade. Tighter spreads mean cheaper trading.
C
Carry trade. A strategy that borrows a low-interest currency to buy a high-interest one, earning the rate difference. It carries a sharp tail risk. (See carry trade.)
Currency pair. Two currencies quoted together, like EUR/USD. Every trade is a bet on one currency against another.
Correlation. How two pairs move relative to each other. Trading correlated pairs can secretly double your risk. (See currency correlation.)
D
Doji. A candlestick with a tiny body, signalling indecision. (See what is a doji.)
Drawdown. The drop from your account's peak to its low point. Deep drawdowns are hard to recover from. (See what is drawdown.)
E–F
Engulfing pattern. A two-candle reversal where the second candle swallows the first. (See bullish and bearish engulfing.)
Fibonacci retracement. A tool marking potential pullback levels like 38.2% and 61.8%. (See Fibonacci basics.)
G–L
Leverage. Controlling a large position with a small deposit. It magnifies gains and losses. (See leverage and margin.)
Liquidity. How easily you can buy or sell without moving the price. Major pairs are highly liquid.
Long. Buying, expecting price to rise. Its opposite is short. (See long vs short.)
Lot. A standardised trade size. A standard lot is 100,000 units; mini and micro lots are smaller. (See what is a lot.)
M
Margin. The deposit required to open a leveraged trade. Not a fee — collateral.
Margin call. A demand to add funds or close trades when losses eat into your margin. (See margin call.)
MACD. A momentum indicator built from moving averages. (See MACD explained.)
Moving average. A line smoothing price to show the trend. (See moving averages.)
N–O
NFP (Non-Farm Payrolls). A monthly U.S. jobs report that can move the dollar sharply. (See what is the NFP.)
OTC (over-the-counter). Trading directly with a dealer rather than on a central exchange — how most retail forex works. (See OTC vs exchange.)
P–Q
Pip. The smallest standard price move, usually the fourth decimal. (See what is a pip.)
Position sizing. Choosing trade size based on your risk, not your hopes. (See position sizing.)
R
Risk-reward ratio. How much you aim to win versus lose per trade. Aim for 1:2 or better. (See risk-reward ratio.)
Risk of ruin. The chance a losing streak drains your account past recovery. (See risk of ruin.)
RSI (Relative Strength Index). A momentum oscillator between 0 and 100. (See RSI explained.)
S
Short. Selling first, expecting price to fall.
Slippage. When an order fills at a different price than expected — common around news.
Spread. See bid-ask spread.
Stop loss. An order that closes a trade automatically to cap a loss — the single most important risk tool. (See what is a stop loss.)
Support and resistance. Price levels where the market has repeatedly stalled. (See support and resistance.)
Swap (rollover). Interest paid or earned for holding a position overnight. (See swap and rollover.)
T–U
Take profit. An order that closes a trade automatically to lock in a gain. (See take profit.)
Trend. The general direction of price — up, down, or sideways. (See market trends.)
V–Z
Volatility. How much and how fast price moves. Bollinger Bands help visualise it. (See Bollinger Bands.)
The terms that matter most
If you only truly master a handful, make them these: leverage, margin, stop loss and spread. Together they cover your biggest risk (leverage/margin), your biggest protection (stop loss), and your main cost (spread). Everything else builds on that foundation.
Warning
Knowing the words isn't the same as knowing the risks. Leverage and margin in particular sound harmless but are the fastest way to lose an account — understand them fully before funding anything.
Where to go from here
Use this glossary as your hub. Each linked guide goes deeper on a single term, and together they form a complete beginner's education. Start with the basics — what is forex — and work outward as your curiosity grows.
Risk
Every term here connects to real risk. Trade only with money you can afford to lose, always use a stop loss, and practise on a demo before going live.
Put the vocabulary into practice
Terms stick when you see them on a live chart. A regulated broker with a free demo lets you connect every word in this glossary to real price action before risking money.
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