Trading Glossary A–Z

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This trading glossary collects the words that confuse beginners most often, across currencies, gold, shares and crypto. Each definition aims to be understandable on its own, without any other page open. Where a term needs more room, it links to the lesson that explains it properly.

How to use this glossary

Use the letters below to jump down the list, or search the page with your browser's find function. If you are working through the lessons in order, it can help to read the definitions for pip, lot, spread, margin and leverage before starting the forex lesson, and those for blockchain, private key, seed phrase and stablecoin before the crypto lesson.

Four terms that trip up almost everyone

Margin is not the maximum loss

Beginners often assume that if a trade needs $400 of margin, $400 is all they can lose. It is not. Profit and loss are based on the full position, and margin is only the deposit set aside. With protection rules in place you may not lose more than your account balance, but you can easily lose more than the margin on a single trade.

The spread is paid even if the price never moves

Buy at the ask and sell straight back at the bid and you have lost money, because the two prices differ. On one standard lot of EUR/USD, a 1-pip spread is $10 before anything else happens.

A cheap coin is not a small coin

A token priced at a fraction of a cent can still be worth hundreds of millions of dollars in total if trillions of units exist. Market capitalisation, not unit price, measures size; our lesson on small crypto shows the arithmetic.

A stop-loss is a request, not a guarantee

If price jumps past your stop, the order fills at the next available price. Over a weekend or on sudden news, that can be far from the level you chose.

Terms A to Z

Ask: The price at which a dealer, broker or exchange will sell to you, which makes it the price you pay when you buy. It is sometimes called the offer, and it always sits slightly above the bid. The gap between the two is the spread.
Base currency: The first currency named in a pair. In EUR/USD the euro is the base, and the quoted number tells you how many US dollars one euro costs. Buying the pair means buying the base currency; selling it means selling the base currency.
Bid: The price at which a dealer or exchange will buy from you, so the price you receive when you sell. On a quote screen it is shown first, just below the ask. A position bought at the ask and sold straight back at the bid loses the spread.
Block reward: The new coins paid to whoever adds a block to a proof-of-work blockchain. On Bitcoin the reward started at 50 BTC and halves roughly every four years; it has been 3.125 BTC per block since the April 2024 halving.
Blockchain: A shared record of transactions grouped into blocks, each carrying a fingerprint of the block before it, and copied across many independent computers. Altering an old entry would break every later fingerprint, which is what makes the record hard to rewrite. See how crypto works.
CFD: A contract for difference: an agreement with a provider to settle, in cash, the change in an asset's price between opening and closing a position. You never own the currency, metal, share or coin itself, and the contract is only as sound as the firm on the other side.
Cold wallet: A crypto wallet whose private keys are kept offline, usually on a small hardware device or on paper. Because the keys never touch an internet-connected computer, they are harder to steal remotely, but losing the device and its backup phrase means losing the coins.
Commission: A separate fee charged for carrying out a trade, either as a fixed amount, an amount per lot or a percentage of the value. Some accounts charge commission and offer tighter spreads in exchange; others build all their charges into the spread.
Confirmation: Each block added to a blockchain after the block containing your transaction. One confirmation means the transaction is recorded; each extra block makes it harder to reverse. Exchanges often wait for several confirmations before crediting a crypto deposit.
Cross pair: A currency pair that does not include the US dollar, such as EUR/GBP, EUR/JPY or GBP/JPY. Working out a pip value on a cross in dollars takes an extra conversion step, which the pip calculator handles for you.
Custody: The safekeeping of an asset on someone else's behalf. A broker holding your shares in a nominee account and an exchange holding your coins in its wallets are both acting as custodians, and the rules protecting you differ greatly between them.
Dividend: A payment a company makes to its shareholders, usually in cash and usually out of profits. Dividends are decided by the company's board and can be raised, cut or stopped at any time. The dividend yield compares a year's dividends with the share price.
Equity: In a trading account, the balance plus or minus the running profit or loss on all open positions. Equity changes every time prices move. It is the figure the provider compares with your used margin to decide whether to close positions.
ETF: An exchange-traded fund: a fund that holds a basket of assets, often designed to follow an index such as the S&P 500, and whose units trade on a stock exchange during market hours much like a share. ETFs charge an annual fee taken from the fund.
Gap: A jump in price from one level to another with no trading in between. Gaps are common when a market reopens after a weekend or overnight break and news has arrived in the meantime. A stop-loss caught in a gap is filled at the next available price, which can be much worse.
Halving: The event, roughly every 210,000 blocks or about four years, when the Bitcoin block reward is cut in half. Halvings slow the rate at which new coins are created until supply reaches its 21 million cap. See the Bitcoin lesson.
Index: A single number that tracks the combined value of a group of shares, calculated to a published rule. Examples include the S&P 500, the FTSE 100, the DAX and the Nikkei 225. You cannot buy an index directly, but funds and CFDs can follow one.
Leverage: Exposure larger than the money you put down, provided by the broker. At 30:1, $1 of margin controls $30 of position, so a 1% price move changes your margin by 30%. Retail leverage is capped by regulators in many countries.
Limit order: An instruction to buy only at a stated price or lower, or to sell only at a stated price or higher. It gives you control over the price but not the timing: if the market never reaches your level, the order is never filled.
Liquidity: How easily an asset can be bought or sold without moving its price much. Major currency pairs and large company shares are usually very liquid. Small tokens and thinly traded shares are not, which shows up as wide spreads and sudden price jumps.
Lot: A standard trade size. In forex one standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. For gold one lot is commonly 100 troy ounces, although providers can set their own sizes.
Margin: The deposit a provider sets aside from your account while a leveraged position is open. It is calculated as the position value divided by the leverage. Margin is not the most you can lose; losses are based on the full position. Try the margin calculator.
Margin call: A warning from a provider that your equity is falling towards the level at which open positions will be closed automatically. Rather than adding money in a hurry, many traders treat a margin call as a sign that a position was too large in the first place.
Margin level: Equity divided by used margin, shown as a percentage. At 100% your equity equals the margin in use. Under UK and EU rules, providers must begin closing a retail client's positions when the margin level reaches 50%.
Market capitalisation: The total market value of a company or a crypto token, found by multiplying the price by the number of shares or tokens in circulation. It is a better guide to size than the price of a single unit, which on its own tells you very little.
Market order: An instruction to buy or sell immediately at the best price available. It guarantees the order is filled in normal conditions, but not the exact price, which can differ from the one on screen in a fast or thin market.
Negative balance protection: A rule that prevents a retail client from losing more than the money in their trading account. It applies to retail CFD clients in the UK and EU. Elsewhere it may be offered voluntarily or not at all, so check the terms.
Nominee account: An account in which a broker holds shares or funds for a client. The client remains the owner, and the rules in major markets require these assets to be kept separate from the broker's own, so that they are protected if the broker fails.
Order book: The live list of buy orders and sell orders waiting on an exchange, arranged by price. The best bid and best ask sit at the top. The depth of the book shows how much could be traded before the price moves noticeably.
Pip: The standard step in a currency price: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen. On a pair quoted in dollars, one pip on a standard lot is worth $10. Value any pair with the pip calculator.
Private key: A secret number that proves ownership of a crypto address and signs transactions from it. Whoever holds the private key controls the coins. Genuine services never ask you for it, and anyone who obtains it can empty the address.
Quote currency: The second currency in a pair, in which the price is expressed. In EUR/USD the quote currency is the US dollar, so profits and losses on that pair are counted in dollars before any conversion into your account currency.
Rollover: The daily cut-off at which open positions are carried to the next trading day, 17:00 New York time in forex. Overnight financing is charged or credited at this point, and the Wednesday rollover usually carries three days' worth to cover the weekend.
Seed phrase: A list of 12 or 24 ordinary words, generated by a crypto wallet, from which all its private keys can be rebuilt. It is the master backup for the wallet. Store it offline, never type it into a website, and never share it with anyone claiming to offer support.
Settlement: The formal exchange of cash for the asset after a trade is agreed. US shares settle one business day after the trade, known as T+1. Crypto transfers settle when confirmed on the blockchain. CFDs do not settle into the asset at all.
Slippage: The difference between the price you expected when placing an order and the price at which it was actually filled. Slippage is most common around major news, at market opens and in thinly traded assets, and it can work for or against you.
Spread: The gap between the bid and the ask. It is the first cost of every trade, paid the moment a position opens, and it widens when markets are quiet or hectic. See trading fees explained for how it adds up.
Stablecoin: A crypto token designed to keep a steady value, usually one US dollar, by holding reserves or using other mechanisms. It is not a bank deposit and carries issuer, reserve and platform risks. USDT is the most widely traded example.
Stop-loss: An order that closes a position automatically if the price reaches a chosen level, capping the planned loss. In a gap or a very fast market it is filled at the next available price, so the actual loss can be larger than planned.
Swap: The overnight financing charge or credit applied to a leveraged position held past the daily rollover. It reflects the interest-rate difference between the two currencies plus the provider's markup, and it keeps adding up for as long as the position stays open.

Missing a word? Suggest it through the contact page. For questions rather than definitions, try the beginner FAQ.