Trading Glossary: 80+ Terms Explained Simply in 2026

The ADX (Average Directional Index) is a technical indicator that measures the strength of a trend without indicating its direction. An ADX above 25 signals a strong trend. It uses two companion lines (+DI and -DI) to determine the direction of the move.

The ask (ask price) is the price at which a seller is willing to sell an asset. This is the price you pay when opening a buy (long) position. The ask is always higher than the bid. The difference between the two is the spread.

The ATR (Average True Range) is a volatility indicator that measures the average range of price movement over a given period. Primarily used for stop loss placement and position sizing. A high ATR means high volatility; a low ATR means the market is relatively quiet.

Backtesting is the process of testing a trading strategy on historical data to evaluate its past performance. Allows you to validate or disprove a strategy before deploying it with real money. Past results do not guarantee future performance.

A bear (bearish) is a term describing a market or trader that expects prices to fall. A "bear market" is a prolonged downtrend (generally a decline of more than 20% from highs). A bearish trader looks to sell or short the market.

The bid (bid price) is the price at which a buyer is willing to purchase an asset. This is the price you receive when you sell or open a short position. The bid is always lower than the ask.

Bollinger Bands are a volatility indicator consisting of a central moving average and two bands set at 2 standard deviations. Bands widen during high volatility and contract during low volatility. A "squeeze" (extreme contraction) often precedes a significant price move.

A breakout is a price move that breaks through a significant support or resistance level. A valid breakout is typically accompanied by above-average volume. False breakouts (fakeouts) are common and should be filtered with additional confirmations.

A broker is a financial intermediary that executes trading orders on behalf of clients. The broker provides market access, the trading platform, and price data. RaiseFX is an FSCA-regulated broker (#50506) based in Johannesburg, offering leverage up to 1:500 and 500+ instruments on MT5.

A bull (bullish) is a term describing a market or trader that expects prices to rise. A "bull market" is a prolonged uptrend. A bullish trader looks to buy the market.

A candlestick is a graphical representation of a trading period showing the open, close, high, and low prices. The body represents the difference between open and close. The wicks (shadows) show the extremes reached. Candlestick patterns (doji, hammer, engulfing) provide trading signals.

A CFD (Contract for Difference) is a derivative product that allows you to speculate on price changes without owning the underlying asset. The trader profits (or loses) the difference between the opening and closing price of the position. CFDs are available on forex, stocks, indices, commodities, and cryptocurrencies.

A challenge (prop firm) is an evaluation phase required by some prop firms to verify a trader's skills before granting a funded account. The challenge sets a profit target to achieve within a given time frame while respecting drawdown rules. RaiseMyFunds stands out by offering Instant Funding with no challenge required.

A commission is a fixed fee charged by the broker for each transaction. Some brokers charge a commission per lot on top of the spread (ECN model), while others include the commission in the spread (market maker model). Commissions are usually expressed in dollars per standard lot.

The consistency rule is a rule imposed by some prop firms requiring that the trader's profits be distributed evenly across trading days. This rule penalizes strategies that capture large gains on a few days. Not all prop firms enforce this rule.

Copy trading is a feature that allows you to automatically replicate another trader's trades in real time. The copier allocates capital and the copied trader's positions are reproduced proportionally on their account. Popular among beginners who want to follow experienced traders.

Correlation is a statistical measure indicating how closely two assets move together. A correlation of +1 means they move in exactly the same direction. A correlation of -1 means they move in opposite directions. Traders use correlations to diversify positions and manage overall risk.

A cross pair is a currency pair that does not include the US dollar. Examples: EUR/GBP, EUR/JPY, GBP/CHF. Cross pairs generally have wider spreads and lower liquidity than major pairs that include the dollar.

A currency pair is a quotation of one currency's value relative to another. The first currency is the base currency; the second is the quote currency. EUR/USD = 1.1050 means one euro is worth 1.1050 US dollars. Major pairs include EUR/USD, GBP/USD, USD/JPY, and USD/CHF.

The daily drawdown is the maximum loss allowed in a single trading day. In prop firms, exceeding the daily drawdown typically results in account closure. This threshold is often set between 4% and 5% of initial capital. Some prop firms like RaiseMyFunds do not impose a daily drawdown limit.

Day trading is a trading style that involves opening and closing all positions within the same day, with no overnight holdings. Day traders profit from intraday movements and avoid the risk of overnight gaps. Requires significant availability and strong stress management.

A demo account is a simulated trading account using virtual money. Allows you to practice and test strategies without risking real capital. Market conditions (prices, spreads) mirror the live account, but execution may differ due to the absence of real slippage and liquidity constraints.

A divergence is a situation where the price of an asset and a technical indicator (RSI, MACD) move in opposite directions. A bullish divergence (price falling, indicator rising) often signals an upcoming upward reversal. A bearish divergence signals a potential downward reversal. One of the most reliable signals in technical analysis.

Drawdown is the decline in capital from a peak to a subsequent trough, expressed as a percentage or absolute amount. In prop firms, the maximum drawdown is the loss threshold beyond which the account is closed. A 10% drawdown on a $100,000 account means the account will be closed if the balance drops to $90,000.

An EA (Expert Advisor) is an automated trading program (trading robot) that executes trades according to predefined rules on MetaTrader 4 or MetaTrader 5. An EA can analyze the market, place orders, manage positions, and apply stop losses without human intervention. Quality depends on the programmed strategy and market conditions.

An ECN (Electronic Communication Network) is a type of broker that connects traders' orders directly to liquidity providers (banks, institutions). ECN brokers generally offer very tight spreads but charge a commission per trade. Execution is typically faster and more transparent than with a market maker.

An entry is the price point at which a trader opens a position. The entry can be executed at market price (market order) or at a predefined price (limit or stop order). Entry point selection is critical for each trade's risk/reward ratio.

An exit is the price point at which a trader closes a position. The exit can be triggered by a take profit, a stop loss, a trailing stop, or a manual decision. Good exit management is often more important than entry selection.

A Fibonacci retracement consists of horizontal levels drawn between a significant high and low based on Fibonacci ratios: 23.6%, 38.2%, 50%, 61.8%, and 78.6%. The 61.8% level (the golden ratio) is the most significant. These levels serve as potential zones for price bounces or reversals.

A fill is the moment an order is actually executed at market price. The fill price may differ from the requested price due to slippage, especially during high volatility or low liquidity. A "partial fill" means only part of the order was executed.

Forex (Foreign Exchange) is the foreign exchange market where currencies are traded against each other. It is the largest financial market in the world, with daily volume exceeding $7.5 trillion. Forex is open 24 hours a day, 5 days a week, offering exceptional liquidity on major pairs.

Fundamental analysis is an analysis method that evaluates an asset's intrinsic value by studying economic, financial, and geopolitical data. In forex, this includes interest rates, GDP, employment data, and central bank policies. Complementary to technical analysis.

A gap is a price discontinuity between one candle's close and the next candle's open, creating a visible "hole" on the chart. Gaps mainly occur at Monday's market open or after major announcements. A gap up is bullish; a gap down is bearish. Gaps are often (but not always) filled subsequently.

Hedging is a strategy of taking an opposite position to an existing one to reduce risk. For example, buying EUR/USD while simultaneously selling EUR/GBP to partially offset dollar exposure. Hedging reduces risk but also limits profit potential. Some brokers and prop firms restrict or prohibit hedging.

The Ichimoku Cloud is a complete technical analysis system with five components: Tenkan-sen, Kijun-sen, Senkou Span A and B (forming the cloud), and Chikou Span. Price above the cloud is bullish; below is bearish. The cloud acts as dynamic support/resistance.

A technical indicator is a mathematical tool applied to price data to generate trading signals. Indicators are categorized by function: trend (Moving Averages, Ichimoku), momentum (RSI, MACD, Stochastic), volatility (ATR, Bollinger Bands), and volume. They do not predict the future but identify probabilities.

Instant Funding is a prop firm model where the trader gains direct access to a funded account without passing a challenge or evaluation. The trader purchases access and starts trading immediately. RaiseMyFunds, based in Johannesburg and regulated by the FSCA (#50506), offers Instant Funding with accounts from $50,000 to $400,000 and a 70-85% profit split.

Leverage is a mechanism that allows you to control a position larger than your deposited capital. A leverage of 1:100 means $1,000 allows you to control a $100,000 position. Leverage amplifies both gains and losses proportionally. RaiseFX offers leverage up to 1:500 on its MT5 accounts.

A limit order is an order to buy or sell at a specific price or better. A buy limit order executes at the requested price or lower. A sell limit order executes at the requested price or higher. The order is only filled if the market reaches the specified price.

Liquidity is the ability of a market to absorb large orders without significantly impacting the price. A highly liquid market (like EUR/USD) allows quick buying and selling with tight spreads. A less liquid market (exotic pairs, some stocks) can cause slippage and wider spreads.

A long position is a buy position on an asset. The trader buys with the expectation that the price will rise, then sells higher to realize a profit. "Going long on EUR/USD" means buying euros against US dollars.

A lot is the standard unit of measurement for position size in trading. A standard lot in forex represents 100,000 units of the base currency. A mini lot is 10,000 units (0.1 lot). A micro lot is 1,000 units (0.01 lot). The pip value depends on the lot size.

The MACD (Moving Average Convergence Divergence) is a trend and momentum indicator showing the relationship between two exponential moving averages (12 and 26 periods). Composed of the MACD line, signal line (9 EMA), and histogram. Crossovers and divergences with price generate trading signals.

Margin is the minimum amount required in your account to maintain an open position. Margin is calculated based on position size and leverage. If available margin falls below the required threshold, a margin call is triggered.

A margin call is a warning issued by the broker when account equity falls below the required margin level. The trader must then deposit additional funds or close positions to free up margin. If the situation is not corrected, the broker may automatically close positions (stop out).

A market maker is a type of broker that takes the opposite side of its clients' trades. The market maker sets its own bid and ask prices and profits from the spread. This model can create a potential conflict of interest, as the broker profits when the trader loses. ECN/STP brokers offer a more transparent alternative.

A market order is an order to buy or sell executed immediately at the best available price. Execution is guaranteed but the exact price is not (slippage risk). It is the simplest and fastest order type.

MetaTrader (MT4/MT5) refers to trading platforms developed by MetaQuotes. MT4 is the most widespread platform for forex, while MT5 is the advanced version offering more timeframes, indicators, and access to stock markets. MT5 supports Expert Advisors (EAs) and the MQL5 programming language. RaiseFX uses MT5 for its 500+ instruments.

A minor pair is a currency pair that includes a major currency (other than USD) combined with another major currency. Examples: EUR/GBP, EUR/AUD, GBP/JPY. Minor pairs generally have higher spreads and different volatility characteristics compared to major pairs.

A moving average is a trend indicator that calculates the average price over a defined period. The SMA (Simple) calculates an arithmetic mean. The EMA (Exponential) gives more weight to recent prices. The most watched periods are 20, 50, and 200. Moving average crossovers generate buy or sell signals.

News trading is a strategy that involves trading around major economic announcements (NFP, rate decisions, GDP). News trading exploits the volatility generated by these events. It is a risky strategy due to widened spreads and frequent slippage during announcements. Some prop firms prohibit trading during news events.

The overnight fee (swap) is a fee charged for holding a position open past the daily market close (typically 5:00 PM New York time). This fee is based on the interest rate differential between the two currencies in the pair. Swaps can be positive (credit) or negative (debit) depending on the position direction and prevailing rates.

A pip (Percentage in Point) is the smallest standard unit of price movement in the forex market. For most pairs, one pip equals the fourth decimal place (0.0001). For yen pairs (USD/JPY), one pip equals the second decimal place (0.01). A move from 1.1050 to 1.1060 on EUR/USD represents 10 pips.

A pipette is a subdivision of a pip, corresponding to the fifth decimal place (0.00001) for most forex pairs. One pip equals 10 pipettes. The pipette allows more precise quoting and is often used by ECN brokers to display tighter spreads.

A position is an open trade in the market. A position can be long (buy) or short (sell). Position size is expressed in lots. An open position is exposed to market fluctuations until it is closed.

Price action is a technical analysis method that focuses exclusively on raw price movements and candlestick patterns, without using technical indicators. Price action traders study support, resistance, trends, chart patterns, and candle formations to make trading decisions.

The profit split is the percentage of profits that the trader keeps when trading with a prop firm's capital. An 80% profit split means the trader keeps 80% and the prop firm keeps 20%. At RaiseMyFunds, the profit split ranges from 70% to 85% depending on account size.

The profit target is the profit level that must be reached to pass a prop firm challenge phase, or the gain target set for an individual trade. In prop firms, the profit target is typically 8% to 10% of initial capital during the challenge. For individual trades, it is the price level where the take profit is placed.

A prop firm (proprietary trading firm) is a company that provides capital to traders so they can trade on financial markets. The trader does not risk their own capital but shares profits with the firm. RaiseMyFunds is an FSCA-regulated prop firm (#50506), based in Johannesburg, offering Instant Funding accounts from $50,000 to $400,000 with a 70-85% profit split (depending on account size).

A pullback is a temporary price move against the prevailing trend. In an uptrend, a pullback is a temporary decline before the uptrend resumes. Traders use pullbacks as entry opportunities in the trend's direction, often combined with Fibonacci levels or moving averages.

A range is a period during which the price oscillates between support and resistance without a clear directional trend. Range trading involves buying at support and selling at resistance. An ADX below 20 generally confirms a ranging market.

Resistance is a price level where selling pressure is strong enough to prevent the price from continuing higher. Resistance acts as a "ceiling" for price. When resistance is broken, it can transform into support. Resistance levels are identified on charts by recurring price rejection zones.

A reversal is a change in the direction of the market's trend. A bullish reversal occurs when a downtrend reverses and becomes an uptrend. Reversal signals include RSI/MACD divergences, candlestick patterns (hammer, engulfing), and trendline breaks.

The risk/reward ratio is the ratio between a trade's potential risk and potential gain. A 1:2 ratio means for every dollar risked, the potential gain is two dollars. A minimum ratio of 1:1.5 is recommended. Profitable traders typically aim for 1:2 or 1:3 ratios, which allows profitability even with a win rate below 50%.

The RSI (Relative Strength Index) is a momentum oscillator measuring the speed and magnitude of price movements on a scale from 0 to 100. Above 70: overbought. Below 30: oversold. RSI/price divergences are among the most reliable technical signals. Standard period: 14.

Scalping is an ultra-short-term trading style that aims to capture very small price movements (a few pips) across a large number of trades. Scalpers hold positions for seconds to minutes. Requires very low spreads, fast execution, and intense concentration.

A short position is a sell position on an asset. The trader sells an asset they do not own, expecting the price to fall, in order to buy it back cheaper for a profit. "Shorting EUR/USD" means selling euros against dollars, anticipating the euro will decline.

Slippage is the difference between the requested price and the actual fill price when an order is executed. Slippage occurs during high volatility or low liquidity. It can be positive (better price than requested) or negative (worse price). ECN brokers generally experience less slippage.

The spread is the difference between the ask (buy) price and the bid (sell) price of an asset. It is the primary transaction cost in forex/CFD trading. A 1-pip spread on EUR/USD means the ask price is 1 pip higher than the bid. Spreads vary by pair, time of day, and broker type.

The Stochastic Oscillator is an oscillator that compares the closing price to its price range over a given period. It moves between 0 and 100 with two lines: %K (fast) and %D (slow). Above 80: overbought. Below 20: oversold. Particularly effective in ranging markets.

A stop loss is an automatic order that closes a position when the price reaches a predefined loss level. It is the fundamental risk management tool in trading. Placing a stop loss before each trade limits potential losses. Stop loss distance is often calculated based on ATR.

STP (Straight Through Processing) is an execution model where the broker routes orders directly to liquidity providers without human intervention. STP offers fast and transparent execution. STP brokers earn money through spreads or commissions, without taking the opposite side of trades.

Support is a price level where buying pressure is strong enough to prevent the price from continuing lower. Support acts as a "floor" for price. When support is broken, it can transform into resistance. Support levels are identified by recurring bounce zones on charts.

A swap is a fee (or credit) applied each night for holding a position open, based on the interest rate differential between the two currencies. A positive swap means the trader receives a credit. A negative swap means a fee is debited. See also: Overnight fee.

Swing trading is a medium-term trading style where positions are held for several days to several weeks. Swing traders aim to capture intermediate price moves (the "swings") within a trend. This approach requires less screen time than day trading or scalping.

A take profit is an automatic order that closes a position when the price reaches a predefined profit level. Take profit secures gains without requiring constant market monitoring. It is the opposite of stop loss and is an integral part of any position management strategy.

Technical analysis is an analysis method that studies price charts and mathematical indicators to anticipate future market movements. It is based on the principle that price history contains all the information needed to forecast trends. The foundation for most short-term and medium-term trading strategies.

A timeframe is the time period represented by each candle on a chart. Common timeframes include: M1 (1 minute), M5 (5 minutes), M15 (15 minutes), H1 (1 hour), H4 (4 hours), D1 (daily), W1 (weekly), MN (monthly). Scalpers use M1-M5, day traders use M15-H1, swing traders use H4-D1.

A trailing stop is a dynamic stop loss that follows the price in the favorable direction and locks in when the price reverses. For example, a 20-pip trailing stop always stays 20 pips below the highest price reached. It protects gains while letting winning positions run.

A trend is the general direction of price movement over a given period. An uptrend is characterized by higher highs and higher lows. A downtrend features lower highs and lower lows. Trends can be identified using moving averages, Ichimoku, or trendlines.

Volatility is a measure of the magnitude of price fluctuations of an asset over a given period. High volatility means large, rapid price movements. ATR and Bollinger Bands are the main volatility indicators. Economic announcements and geopolitical events increase volatility.

Volume is the number of contracts or lots traded during a given period. Volume confirms the strength of price moves: a breakout with high volume is more reliable than a low-volume breakout. In spot forex, the displayed volume is tick volume (number of transactions) rather than actual monetary volume.