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Don't even think about going on the market without knowing these terms

These are in my opinion the most used 50 terms, which should every good trader know:


  • 1. 1. Ask price- is the price where the market will sell a specific currency pair from you 
  • 2. Bid price- is the price where the market will buy a specific currency pair from you
  • 3. Spread-  is the difference between ask and bid price, varies from brokers, used for determining commissions.
  • 4. Pip 
    -     is the smallest movement in the market, 1 pip for EUR/USD = 0.0001, for yen pairs it is 0.01
  • 5. Exchange rate 
    -       the value of one currency expressed in terms of the other. If for example USDJPY is 111. 5, then 1 dollar is worth 111.5 yens.
  • 6. Leverage
    -     allows you to get to the position greater than your account is.  For instance if trader has 1 dollar and leverage is 200:1, he can leverage his position 200 times - he can trade 200 $ in total. The other 199$ are covered by bank or broker. 
  • 7. Margin
    -     is the deposit required to open or maintain a position.
  • 8. Base currency-  the first currency in the currency pair - for example  in EUR/USD EUR is the base currency
  • 9. Quote currency- the second currency in the currency pair - for example in EUR/USD USD is the quote currency
  • 10. Breakout
         - is a price movement, which has surpassed the resistance zone. After this movement the resistance zone becomes support
  • 11. Resistance - is the point on the chart, which upward move is  impeded by an overwhelming level of security. It means, that the price action will retrace lower to the support and will try again to "penetrate" this level . The more tries to penetrate this resistance price action has, the stronger the resistance is.
  • 12. Support- after breaking the resistance, the resistance becomes support, this action is known as breakout. It's place, where the price action finds support (backup) in future movements.



  • 13. Going long - means buying a currency (also known as going bullish)
  • 14. 
    Going short     - means selling a currency (also known as going bearish) 
  • 15. Bearish market - is opposite of bullish market and is a group of securities in which prices fall  or are expected to to fall
  • 16. Bullish market - is the opposite of bearish market and is a group of securities in which prices rise or are expected to to rise.
  • 17. Broker - is an individual or firm that enables people to enter market and charges fee or commission for executing orders made by trader or investor 
  • 18. Commission - is a fee charged from your broker for every executed trade and is included in your equity after execution. 
  • 19. Swap - is defined as an overnight or rollover interest for holding positions
  •  20. Equity-  is total amount of cash and the amount of opened position (doesn't matter if they are winning or losing) totaled.
  • 21. Margin Call- is the amount of equity needed to ensure, that you can cover your losses.
  • 22.Candlestick chart - A candlestick is a chart that displays the high, low, opening and closing prices of a security for a specific period(time frame). The candlestick divides to wide part - "real body" which tells the highest and lowest price. Black/red indicates that the stock closed lower and white/green indicates that the stock closed higher. 
    See picture below:

  • 23.Time Frame  -  refers to the period that a forex trader chooses to operate in. The most common ones are 15 minute, 1 hour, 4 hours and 1 day
  • 24. Risk to reward ratio- refers to how much you are risking on one single trade,  to how much you make if the trade goes in the right direction. If you are risking 10$ and have ratio 1:3 you should make profit at least 30$.
  • 25. Stop loss (SL)- protects you by "kicking you out" if the trade doesn't go the way you intended. Doesn't require you presence and is widely used among traders 
  • 26. Profit target (TP)- is a price point where you expect price will increase or decrease in your favor. This target is usually determined before getting into the trade and should be used for exiting, especially taking profit if the price action reached this point.
  • 27. Entry- is the price point where the trader decides to open a position 
  • 28. Exit- is the price point where the traded decides to close a position 
  • 30. Daily low - is the lowest price paid for an equity during a given trading day.
  • 31. Daily high  - is the highest price paid for an equity during a given trading day.
  • 32. Daily low- is the difference between the low and high prices for a financial security over a day.
  • 33. Lot - represents the standardized quantity or number of contracts of a financial instrument. Minimal lot is 0.01 in most case, which represent 1 000 units of some currency pair.



  • 34. Technical analysis - is an analysis to evaluate securities and attempt to forecast future movement of price action. Unlike the fundamental analysts, the technical analysts focus on chart and use various technical tools(Advanced patterns, Elliott wave theory, support/resistance etc.) to evaluate future price movement.
  • 35. Fundamental analysis-  is an analysis to evaluate securities and attempt to forecast future movement of price action by looking at key numbers and economic indicators. They consider economic situation,  industry conditions, inflation, interest rates, volatility of the market, political news etc. 
  • 36. Volatility of the market- is the dispersion of a returns for a given security  or market index. It depicts amount of uncertainty or risk about the size of changes in the markets 
  • 37. Inflation- is the rate at which the general level of prices for goods and services is rising and consequently the purchase power of currency is falling. 
  • 38. Liquidity - refers to the extent to which a market allows assets to be bought or sold.  It describes a degree of how quickly the market can be sold or bought without affecting the asset's price 
  • 39. Daily trader - is someone who doesn't hold positions for a long time (mostly less than one day), his goal is to make a lots of efficient short trades.
  • 40.Spike - is a large upward or downward movement of a price in short period of time.
  • 41. Gap- gap is a break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Mostly happens throughout the weekend.

  • 42. Divergence - Divergence appears on a bar chart when the price of an asset and an indicator, index or other related asset moves in opposite directions.  The traders use a help of divergence by identifying situation where divergence occurs and indicates reversals in price action. 
  • 43. Technical indicators- look to predict the future price levels or just a general price direction. The most common ones are MACD, Bollinger Bands,  Relative strength index and Stochastic.

  • 44. Trading patterns- are distinctive formations created by movements of security prices. A pattern is determined by a line connecting common price movements and are used to resolve next price movement.

  • 45. Elliott wave theory - is based on Dow theory in that stock prices move in waves. He broke down and used this fundamentals to determine specific patterns, which repeat themselves. The main idea is that there is an impulse wave and that there is a correction wave which repeat endlessly
  • 46. Risk and money management- is overseeing the cash usage by an individual or group, which involves also risk handling
  • 47. Trading plan - a systematic method made usually by individual which is used for screening and evaluating the stocks, determining the risk and formulating long-term and short-term investment objectives.
  • 48. Correlation - measures the degree to which two securities or currency pairs correlate - relate to each other 
  • 49. Pivot points - is a technical analysis indicator used to determine the overall trend of the markets by using 7 pivots(lines). It's the average of the high, low and closing prices from the previous trading day.
  • 50. Trend line- is a line drawn to show a prevailing direction of the move and are visual representations of support and resistance in any time frame. 




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