Forex & Managed Investing Glossary

The price at which you can buy — the higher side of the quote.

The ask (sometimes called the offer) is the best price a seller is currently willing to accept, so it is the price at which you buy. Quotes are always shown as bid/ask, and the difference is the spread you pay on entry.

The first currency in a pair — the one you are buying or selling.

In EUR/USD, the euro is the base currency and the dollar is the quote currency. The price shows how many units of the quote currency one unit of the base currency costs, so buying the pair means buying the base and selling the quote.

The price at which you can sell — the lower side of the quote.

The bid is the best price a buyer in the market is currently willing to pay, so it is the price at which you can sell. It always sits below the ask, and the distance between the two is the spread.

A contract for difference — a leveraged agreement to exchange the price change of an asset.

With a CFD you never own the underlying instrument; you settle the difference between opening and closing price. CFDs give leveraged access to forex, indices, commodities and shares from one account, and carry overnight financing plus the full risk of leverage.

A per-trade charge, typically on raw-spread accounts, quoted per lot per side.

Commission is an explicit fee charged alongside a tighter spread, most often on raw or ECN-style accounts. To compare account types honestly, convert commission into spread terms and add it to the quoted spread to get the all-in cost per trade.

Automatically mirroring another trader's positions into your own account, scaled to your balance.

In copy trading your capital stays in your own account and a provider's trades are replicated into it using a sizing mode — fixed ratio, equity-based or free-margin-based. Because the positions are genuinely yours, you keep trade-level control and can apply your own stops or stop copying at any time.

Two currencies quoted against each other as a single tradable instrument.

Every forex price is relative: you are always long one currency and short another. Majors involve the US dollar and carry the deepest liquidity, crosses exclude it, and exotics pair a major with a smaller economy's currency at much wider spreads.

The fall from an account's peak equity to its lowest point before a new peak.

Drawdown measures the depth of a losing stretch rather than the final result. Maximum drawdown is the single most useful risk statistic when judging a strategy, a money manager or a signal provider, because it describes the worst period an investor would have had to sit through.

Your balance plus or minus the profit and loss on open positions.

Equity is the live value of an account: closed balance adjusted for unrealised profit and loss. Margin level is calculated from equity, which is why unrealised losses — not just closed ones — can trigger a margin call.

A rule that a performance fee is only charged on gains above the previous peak.

A high-water mark records the highest equity level on which a fee has already been paid. New performance fees apply only above that level, so an investor does not pay twice for recovering ground lost in a drawdown.

Borrowed exposure that lets a small deposit control a much larger position — magnifying gains and losses alike.

Leverage expresses how much market exposure you control per unit of your own capital: 1:30 leverage means $1,000 of margin controls $30,000 of exposure. It multiplies profit and loss symmetrically, and regulators cap the maximum available to retail clients — which is why the limit you can access depends on the entity that holds your account.

An instruction to trade only at a specified price or better.

A limit order prioritises price over execution: it will not fill worse than the level you set, but it may not fill at all if the market never trades there. Limit orders avoid negative slippage on entry at the cost of missed opportunities.

How much can be traded without moving the price — the driver of tight spreads.

Liquidity describes the depth of buying and selling interest at a given moment. Deep liquidity produces tight spreads and reliable fills; thin liquidity, such as during the Asian session on European crosses or just after rollover, produces wider spreads and more slippage.

The unit of trade size: 1 standard lot is 100,000 units of the base currency.

Trade size in forex is measured in lots. A standard lot is 100,000 units of the base currency, a mini lot is 10,000, a micro lot 1,000 and a nano lot 100. Lot size determines how much each pip is worth, which makes it the main lever for controlling risk on a trade.

The portion of your funds a broker sets aside as collateral for an open position.

Margin is not a fee — it is the collateral locked while a leveraged position is open, calculated from position size and the leverage in force. Free margin is what remains available for new trades or to absorb losses on existing ones.

A warning that your equity has fallen too close to the margin required to hold your positions.

A margin call is triggered when your margin level falls below the broker's threshold. It signals that you must add funds or reduce exposure; if equity keeps falling, positions are closed automatically at the stop-out level to prevent further loss.

An instruction to trade immediately at the best price available.

A market order prioritises certainty of execution over certainty of price: it fills at whatever the best available price is, which may differ from the last quote you saw. It is the order type most exposed to slippage in fast conditions.

The trader who places the trades in a pooled managed account.

In a PAMM structure the money manager trades the pooled capital as one unit and is compensated from performance. They can trade investor funds but not withdraw them, and their track record — especially maximum drawdown — is the main thing an investor should evaluate.

A guarantee that you cannot lose more than the money in your account.

Negative balance protection caps losses at your account equity, so a gap through your stop cannot leave you owing the broker. It is mandatory for retail clients in several jurisdictions and optional in others, so it depends on the regulated entity you sign with.

A pooled account structure where one money manager trades several investors' capital and results split by percentage share.

PAMM stands for Percent Allocation Management Module. Investors allocate capital into a single account run by a money manager; profit and loss are distributed strictly in proportion to each investor's share of the pool, and the manager is usually paid a performance fee from profit only.

A share of the profit paid to a manager or signal provider, charged only on gains.

A performance fee is deducted from profit before it is distributed to investors. Check whether a high-water mark applies: without one, an investor can pay fees on the same recovered gains twice after a drawdown.

The standard smallest price move in a currency pair — 0.0001 for most pairs, 0.01 for JPY pairs.

A pip is the conventional unit used to measure price movement in forex. For most pairs it is the fourth decimal place (0.0001); for pairs quoted with two decimals, such as USD/JPY, it is 0.01. Pip value in money terms depends on trade size and the quote currency, which is why the same 10-pip move is worth a different amount on different pairs.

Choosing trade size so a losing trade costs only a planned fraction of your capital.

Position sizing works backwards from risk: decide the percentage of equity you are willing to lose, measure the stop distance in pips, then solve for the lot size that makes those two numbers agree. It is the single most reliable mechanism for surviving a losing streak.

The specific licensed company that holds your account and sets your protections and leverage.

Large brokers operate several legal entities under different regulators. The entity named on your account agreement — not the brand — determines your maximum leverage, compensation scheme access and negative balance protection.

The size of the planned profit compared with the size of the planned loss.

Risk-to-reward compares the distance to your target with the distance to your stop. It sets the win rate you need to break even: at 1:2, roughly one winner in three is enough, while at 2:1 you need to be right most of the time.

Client money held separately from a broker's own operating funds.

Segregation means client deposits sit in dedicated accounts and cannot be used for the broker's business expenses. It is a baseline regulatory protection and one of the first things to verify against the specific entity that would hold your account.

The trader whose positions are copied by followers in a copy-trading system.

A signal provider (or strategy provider) publishes trades that subscribers mirror automatically. They are typically paid a share of profit or a subscription fee, and their published statistics should be read for drawdown and trade history length, not just headline return.

The difference between the price you expected and the price you actually got.

Slippage happens when the market moves between order submission and execution, or when your size exceeds the volume available at the best price. It can be negative or positive, and it grows in thin liquidity and around scheduled news releases.

The gap between the buy (ask) and sell (bid) price — the cost you pay to open a position.

The spread is the difference between the ask price you buy at and the bid price you sell at. It is the most common trading cost in forex: a position starts slightly negative by exactly the spread. Spreads widen when liquidity thins — around major news, at rollover and outside the main sessions.

A resting order that closes a losing trade at a predefined level.

A stop loss defines your maximum intended loss before you enter, converting an open-ended risk into a measurable one. It is the input every position-size calculation depends on: risk per trade equals stop distance multiplied by pip value.

The automatic closing of positions once your margin level breaches the broker's floor.

The stop-out level is the margin percentage at which a broker begins force-closing positions, usually starting with the largest loser. It is a protective mechanism, not a choice you make, and it is the reason an over-leveraged account can be liquidated during a fast move.

The interest credit or debit applied for holding a position overnight.

A swap (or rollover) reflects the interest-rate difference between the two currencies in a pair, applied each night a position stays open. It can be positive or negative, and on multi-day positions it often outweighs the spread as the dominant cost.

A resting order that closes a winning trade at a predefined level.

A take profit locks in a target result without requiring you to watch the market. Combined with a stop loss it fixes the trade's risk-to-reward ratio at the moment of entry, which is what makes results comparable across trades.

The size and speed of price movement over a period.

Volatility measures how far and how fast prices move, not their direction. Higher volatility widens the range of both profits and losses for the same position size, which is why position sizing should reference current volatility rather than a fixed lot count.