Every craft has its vocabulary. Learn these terms once and every other lesson becomes easier.

Prices and orders

Bid · The price at which you can sell right now.

Ask · The price at which you can buy right now. It is always a little higher than the bid.

Spread · The difference between ask and bid. It is the cost of opening and closing a trade straight away.

Market order · Buy or sell immediately at the current price.

Limit order · Buy below or sell above the current price, waiting for a better level.

Stop order · Buy above or sell below the current price, waiting for a breakout.

Stop loss (SL) · An order that closes a losing position at a level you chose in advance.

Take profit (TP) · An order that closes a winning position at your target.

Slippage · Getting filled at a slightly different price than expected, usually in fast markets.

Size and money

Lot · The standard unit of size. One lot of EUR/USD is 100,000 euros; one lot of gold is 100 ounces.

Pip · The standard price step. On most currency pairs it is the fourth decimal (0.0001); on yen pairs the second (0.01).

Pip value · What one pip is worth on your position. On one lot of EUR/USD it is $10.

Leverage · Controlling a large position with a smaller deposit. At 1:100, $1,000 of margin controls $100,000.

Margin · The part of your equity set aside to keep a position open.

Free margin · Equity not tied up as margin, available for new trades.

Margin level · Equity divided by used margin, as a percentage. Low levels trigger a stop out.

Swap · The overnight financing charged or paid for holding a position past the daily rollover.

Commission · A fixed fee per lot charged on some instruments.

Account figures

Balance · Your account value counting only closed trades.

Equity · Balance plus the floating result of open trades. This is what the risk rules watch.

Floating P/L · The current result of trades that are still open.

Drawdown · How far equity has fallen from its peak.

Realised P/L · Profit or loss locked in by closing a trade.

Market words

Long / short · A buy position / a sell position.

Bull / bear · Someone expecting prices to rise / fall.

Volatility · How much and how fast a price moves.

Liquidity · How easily you can trade without moving the price.

Trend · A sustained move in one direction.

Range · Price moving sideways between two levels.

Breakout · Price leaving a range or crossing a key level.

Gap · A jump between one price and the next with no trading in between, common after weekends.

Evaluation words

Profit target · The closed profit needed to pass a phase.

Max daily loss · How far equity may fall within one trading day.

Max loss · The floor your equity may never cross.

Trading day · A day on which you opened at least one position.

Funded account · The account you trade after passing, earning a share of the profit.