Reference
Trading glossary
Short definitions of the terms used across the Villiontrd guides.
- Ask
- The price at which a dealer will sell to you; the higher of the two quoted prices.
- Base currency
- The first currency in a pair. In EUR/USD it is the euro.
- Bid
- The price at which a dealer will buy from you; the lower of the two quoted prices.
- CFD
- Contract for difference: a contract that pays the change in an asset's price without ownership of the asset.
- Clone firm
- A fraudulent business that copies the name or details of a genuine authorised firm to appear legitimate.
- Drawdown
- The decline in an account's value from its peak to its lowest point before a new peak.
- Gap
- A jump in price between two trades with no trading in between, often over a weekend or after news.
- Leverage
- Controlling a position larger than the money put up. Leverage of 1:30 means each euro of margin controls 30 euros of exposure.
- Liquidity
- How easily an asset can be bought or sold without moving its price. Low liquidity usually means wider spreads.
- Long / short
- Long means profiting if the price rises; short means profiting if it falls.
- Lot
- A standard unit of position size in forex: 100,000 units of the base currency (mini 10,000, micro 1,000).
- Margin
- The deposit required to open and keep a leveraged position.
- Margin call
- A request from a provider for more funds when losses reduce available margin.
- Negative-balance protection
- A rule that prevents a retail client from losing more than the money in the account.
- Overnight financing
- A daily charge or credit for holding a leveraged position past the end of the trading day; also called swap or rollover.
- Pip
- The standard unit of price change in a currency pair, usually 0.0001 (0.01 for yen pairs).
- Quote currency
- The second currency in a pair. In EUR/USD it is the US dollar.
- Regulator
- The public authority that authorises and supervises financial firms in a country and keeps a public register.
- Slippage
- The difference between the expected price of an order and the price at which it is actually filled.
- Spread
- The difference between the bid and ask prices; a cost paid on every trade.
- Stop-loss
- An order that closes a position automatically when the price reaches a chosen level. Not guaranteed unless stated.
- Stop-out
- Automatic closing of positions by the provider when margin falls below a required level.
- Volatility
- How much and how quickly a price moves. Higher volatility means larger potential gains and losses.