Forex terms,Explained like a human
Forex has a talent for making simple things sound complicated. We’re fixing that — with quick, practical definitions you can use immediately when you’re placing trades, reading charts, or comparing brokers.
Bookmark this page. You’ll come back to it more than you think.
A
A-book
A broker routing model where your trades are sent to external liquidity providers (banks/prime brokers/aggregators) instead of being held internally.
In theory, the broker earns mainly from spreads/commission rather than from clients losing. In practice, routing and pricing still depend on the broker’s technology and liquidity arrangements.
Account currency
The currency your trading account is denominated in (for South Africans, often ZAR, but USD/EUR is common too). It affects how your profit/loss is displayed and whether currency conversion happens in the background.
If you trade instruments priced in a different currency (like USD-quoted pairs), your P/L may be converted before it hits your balance.
ADX (Average Directional Index)
A technical indicator used to measure trend strength rather than direction. It helps you judge whether the market is trending cleanly or chopping sideways.
Traders often combine it with other tools to avoid trend strategies in low-strength conditions.
Algorithmic trading
Trading using a set of programmed rules rather than manual clicks. This can range from simple alerts and auto-entries to fully automated systems that manage risk, entries, and exits.
Even with automation, the strategy still needs testing, risk limits, and monitoring — especially during volatile news.
AML (Anti-Money Laundering)
Compliance rules brokers follow to prevent illegal movement of money through trading accounts. AML checks can involve verifying identity, address, and sometimes source of funds — especially for larger deposits or withdrawals.
It’s also why withdrawals often must go back to the original funding method where possible.
Ascending triangle
A chart pattern where price repeatedly tests a flat resistance level while the “lows” rise underneath it.
Many traders interpret it as bullish pressure building, but it’s not guaranteed. The pattern is usually treated as confirmed only after a clear breakout and (ideally) a retest.
Asian session
The forex trading window broadly aligned with Tokyo/Singapore hours. Liquidity and volatility can be lower than London/New York for many major pairs, but JPY and AUD pairs can move more during this session.
Price can range tightly here and then break out later during overlaps.
Ask price
The price you pay when you buy a currency pair (the broker’s “sell” quote).
It’s usually slightly higher than the bid price because the spread is built in. If you open a buy trade, you enter at the ask.
ATR (Average True Range)
A volatility indicator that measures the typical range of price movement over a period.
ATR doesn’t predict direction — it tells you how much the market tends to move, which helps with stop placement and position sizing.
Higher ATR usually means you need wider stops (and smaller size) to keep risk consistent.
Average entry price
Your blended entry price when you have multiple fills or you add to a position. On netting-style accounts, platforms often show one “average” price rather than separate entries.
This matters for calculating your true stop distance, risk, and break-even level.
B
B-book
A broker routing model where trades are internalised (the broker may not hedge them externally).
This can allow fast execution and flexible trade sizing, but it also creates a potential conflict of interest if the broker profits when clients lose. Many brokers run a hybrid approach rather than pure A-book or B-book.
Backtesting
Testing a strategy on historical price data to see how it would have performed. Backtests help validate rules and find obvious weaknesses, but they can be misleading if the data is poor or if the strategy depends on perfect fills.
A good backtest is usually followed by forward testing.
Balance
Your account value after closed trades, excluding the floating profit/loss of open positions. Balance changes only when you close trades, deposits/withdrawals process, or fees are applied.
Equity is the number that moves in real time with price.
Bar chart
A chart type that shows OHLC (open-high-low-close) using vertical bars with small ticks for open and close. It contains the same information as candlesticks, just presented differently.
Some traders prefer bars because they look “cleaner” when charts get busy.
Base currency
The first currency in a forex pair (e.g., EUR in EUR/USD). When you buy a pair, you’re effectively buying the base currency and selling the quote currency.
Lot sizing is measured in units of the base currency.
Base currency conversion
The process where your platform/broker converts profit/loss into your account currency when the instrument is quoted in a different currency.
For example, if your account is ZAR and you trade EUR/USD, your P/L is typically converted before it reflects in your balance. This can introduce small conversion costs or rate differences.
Bearish
A market view expecting prices to fall. Traders use “bearish” to describe a setup (e.g., bearish break), a trend (bearish structure), or sentiment (risk-off).
It doesn’t mean price must drop immediately — just that downside is the higher-probability direction.
Bid price
The price you receive when you sell a currency pair (the broker’s “buy” quote).
It’s usually slightly lower than the ask due to the spread. Sell trades typically enter at the bid.
Bollinger Bands
Volatility bands plotted around a moving average based on standard deviation. When markets are calm the bands tighten; when markets get volatile the bands widen.
Traders often use them to spot volatility shifts and potential mean-reversion zones — especially in ranges.
Bollinger squeeze
A period where Bollinger Bands compress tightly, signalling low volatility. Squeezes often happen before a sharp move (volatility expansion), but the direction isn’t guaranteed.
Traders usually wait for a breakout plus confirmation rather than guessing.
Bonus Policy
The broker’s official rules for how bonuses work, including eligibility, limits, timeframes, and withdrawal conditions.
Policies often include turnover requirements (how much you must trade), restrictions on which instruments count, and what happens if you withdraw early. A bonus can increase available margin but still be “locked” under conditions.
Bonus Rescue Account
An account type marketed as offering a buffer or credit-style support that can soften drawdowns up to a stated limit.
It can affect how margin and equity behave during losing streaks, sometimes delaying a stop-out. The trade-off is usually stricter rules around withdrawals, profit eligibility, or trading volume requirements.
Break of structure (BOS)
A price move that breaks a prior swing level that defined the current trend.
For example, in a downtrend, breaking the previous swing high can signal a shift in control. Traders often use BOS to confirm trend change rather than trying to pick bottoms/tops blindly.
Breakeven stop
Moving your stop-loss to your entry price once a trade is in profit, aiming to remove downside risk. It can protect capital, but it can also stop you out early in noisy markets before the main move develops.
Many traders only move to breakeven after structure confirms or after a partial take-profit.
Breakout
When price pushes through a key support/resistance zone with momentum. Breakouts tend to work better when volatility and liquidity are high (session overlaps, strong catalysts) and fail more often in choppy conditions.
Many traders look for a breakout + retest rather than entering the first spike.
Bullish
A market view expecting prices to rise. It can describe a setup, trend structure (higher highs/higher lows), or sentiment.
“Bullish” doesn’t mean price rises in a straight line — pullbacks are normal.
Buy limit
A pending order to buy below current price at a specified level. It’s typically used to enter on pullbacks into support zones rather than chasing price higher.
If price never reaches the limit level, the order won’t execute.
Buy stop
A pending order to buy above current price once a trigger level is reached.
Traders often use it to catch breakout momentum when they want confirmation that price is moving up. Once triggered, it usually becomes a market order (unless it’s a stop-limit).
C
Candle body
The thick part of a candlestick showing the distance between open and close.
A large body often indicates strong momentum in that period. A small body suggests indecision, especially when paired with long wicks.
Candlestick
A chart “bar” that shows open, high, low, and close for a timeframe.
Candles make it easy to see momentum (body size) and rejection (wick length). Most price-action patterns are described using candlesticks.
Carry trade
A strategy that tries to earn from interest rate differences between currencies, often reflected in swap/rollover.
It can work in stable, trending markets, but it’s vulnerable during risk-off periods when markets rapidly unwind risk. Swap costs/credits vary by broker and can change over time.
Cent account
An account where balances and trade sizes are displayed in cents (or a cent-equivalent), allowing very small real-money exposure.
It’s popular for beginners practicing execution and risk management without big swings.
Conditions can differ from standard accounts — spreads, available instruments, and execution rules may not match 1:1.
CFD (Contract for Difference)
A derivative that lets you trade price movement without owning the underlying asset.
CFDs are common for forex, indices, commodities, shares, and sometimes crypto. They are leveraged products, meaning small moves can have outsized impact on your account.
Central bank
A country’s monetary authority that sets interest rates and influences liquidity (e.g., Fed, ECB, BoE, SARB).
Central bank expectations can move currencies well before announcements. Rate decisions, statements, and press conferences can cause sharp volatility.
Change of character (CHOCH)
A shift in market behaviour that suggests the current trend may be weakening or reversing.
For example, a downtrend that stops making lower lows and starts breaking prior highs can be a CHOCH signal. Traders often treat it as an “early warning,” then wait for BOS or confirmation.
Channel
Two parallel trendlines that contain price in a sloping range. Channels help traders identify potential buy zones near the lower boundary and sell zones near the upper boundary.
A clean break out of a channel can signal a change in trend strength or direction.
Client funds segregation
A practice (often required by regulators) where client money is held separately from the broker’s operating funds.
This can reduce certain business risks if the broker runs into trouble, but it does not protect you from market losses. The level of protection depends on jurisdiction and broker practices.
Commission
A direct trading fee charged per trade, often per lot and sometimes “per side” (open and close).
Commission accounts may offer raw spreads, so your true cost is spread + commission. The cheapest-looking spread isn’t always cheapest overall once commission is added.
Commodity CFD
A CFD that tracks commodities like gold, silver, or oil. These instruments can behave very differently from currency pairs, with unique volatility patterns and news sensitivity.
Contract size and point value vary, so position sizing must be adjusted.
Compensation scheme
A mechanism in some jurisdictions that may compensate eligible clients if a regulated broker fails.
Coverage limits, eligibility, and what counts as “compensable” vary widely. It’s a safety layer, not a guarantee, and it may not apply to offshore entities.
Consolidation
A period where price moves sideways in a tighter range, often after a strong move. Consolidation can represent a pause before continuation or a distribution phase before reversal.
Many traders wait for a clear break + confirmation rather than guessing direction inside the chop.
Contract size (CFDs)
The “value per lot/contract” that determines how much a one-point move is worth.
For indices and commodities, this can be very different from forex pip value, so traders must check specs before trading. Contract size is a common reason beginners accidentally over-size positions.
Conversion fee
A cost that can appear when funds are converted between currencies during deposits, withdrawals, or profit/loss conversion.
Sometimes it’s an explicit fee; other times it’s baked into the exchange rate applied. For ZAR-based traders, conversion costs can add up when trading mostly USD-quoted instruments.
Copy trader
A trader who follows another trader/strategy and mirrors their trades automatically (or with minimal manual effort).
You typically choose a provider, allocate funds, and accept that results can change quickly based on market conditions and provider behaviour.
Slippage, drawdowns, and risk still sit with you — even if you didn’t click the trades yourself.
Copy trading provider
The platform or broker service that connects strategy managers to copy traders and handles the copying mechanics. Providers usually offer filtering tools (performance, drawdown, risk score, instruments traded) and set how copying is calculated (fixed lot, proportional, equity-based).
Fees can include spread markups, profit share, performance fees, or subscriptions depending on the system.
Correlation
A measure of how two instruments tend to move relative to each other. Positive correlation means they often move in the same direction; negative correlation means they often move opposite.
Correlation matters for risk because multiple “different” trades can actually be the same bet if they’re highly correlated.
CPI (Consumer Price Index)
A key inflation report that influences interest-rate expectations and currency strength. CPI releases can cause sharp moves, widen spreads, and increase slippage risk.
Traders often reduce size or avoid trading right before CPI if they’re not specifically trading the news.
D
Day order
An order type that expires at the end of the trading day if not triggered or filled.
It helps prevent old setups from executing later when conditions have changed. Not all platforms label it the same way, but the idea is “valid for today only.”
Dealing desk
A broker setup where the broker may internalise trades and manage pricing/execution internally.
This can sometimes mean fixed spreads or fewer external liquidity constraints, but it may also involve requotes or restrictions during fast markets. Execution quality varies significantly between brokers.
Demo account
A practice account funded with virtual money.
It’s great for learning the platform and testing strategies, but it doesn’t always match live trading conditions (especially around slippage, spreads, and emotional decision-making). Treat it as a training tool, not proof a strategy will work live.
Deposit bonus
A promotion where the broker adds bonus credit when you deposit funds (e.g., “50% deposit bonus”). It can increase usable margin, but it usually comes with strict turnover requirements and withdrawal rules.
In many cases, bonus funds themselves aren’t withdrawable — only profits, and only after conditions are met.
Diversification
Spreading risk across different instruments or strategies rather than relying on one position or one idea.
True diversification means exposures are not strongly correlated — otherwise you’re just stacking the same risk in different places. It can smooth drawdowns but won’t remove risk entirely.
Doji
A candle where the open and close are very close, suggesting indecision in that timeframe.
Dojis matter most at key levels after strong moves, where they can hint momentum is fading. In the middle of a range, they’re often just noise.
Drawdown
The drop in account value from a previous peak to a later low.
Drawdown matters because it reflects real risk and emotional pressure, not just performance. A strategy with high returns but deep drawdowns can be difficult to stick with long enough to benefit.
Drawdown protection
A feature (or bonus structure) marketed as cushioning losses up to a limit. It may temporarily support equity or margin, but it doesn’t remove trading risk and often comes with conditions. Always check what happens to withdrawals and profits while “protection” is active.
E
ECN (Electronic Communication Network)
A trading environment where orders are matched within a network of participants and liquidity providers. ECN-style accounts often advertise raw spreads and charge commission instead.
Real ECN conditions depend on the broker’s liquidity and execution — so it’s better to evaluate the “all-in cost” and fill quality than the label.
Economic calendar
A schedule of upcoming economic data releases and central bank events. It helps you anticipate times when spreads widen, volatility spikes, and slippage becomes more likely.
Even if you’re a technical trader, knowing the calendar helps avoid being blindsided.
Entry
Your planned point to open a trade, including the price level and the order type used. A strong entry is not just “a good price” — it’s aligned with your stop placement and risk per trade.
Better entries can reduce stop distance and improve risk-reward.
Equity
Your account value in real time, including floating profit/loss from open positions.
Equity is what margin calculations are based on, so it matters more than balance for risk and stop-out. When equity drops too far relative to used margin, you can hit margin call/stop-out.
Expiry rules
Time limits applied to bonuses, promotions, or the benefits they create. If you don’t meet requirements before expiry, the broker may remove the bonus credit and sometimes adjust related benefits.
Expiry rules are one of the biggest “gotchas” with promo-driven accounts.
F
Fibonacci retracement
A tool used to measure potential pullback levels after a move (commonly 38.2%, 50%, 61.8%). It works best when combined with real structure like prior highs/lows and support/resistance zones.
Fibonacci levels are not magic — think of them as areas where traders often pay attention.
Fixed spread
A spread that is intended to remain stable rather than changing with market conditions. Fixed spreads can be useful for planning costs, but they are often wider than the best variable spreads in calm periods.
Some brokers still apply exceptions during extreme volatility or illiquid conditions.
Floating spread
A spread that changes based on liquidity and volatility. During busy sessions spreads can tighten; around news or thin markets they can widen significantly.
Floating spreads are common on most modern broker accounts.
I
Introducing Broker (IB)
A partner or referrer who introduces clients to a broker, often earning commissions or rebates. IBs can be educators, signal services, or affiliates, and their incentives can shape how they recommend brokers.
It’s worth knowing when advice is coming through an IB relationship.
Instant Execution
An execution mode where the broker tries to fill your order at the quoted price. If the price has moved, you may receive a requote and must accept a new price to proceed.
Instant execution can feel “stable,” but it can be frustrating during fast markets because requotes can block entries.
M
Market Execution
An execution mode where your order is filled at the best available price once it reaches the broker/server.
Market execution usually avoids requotes, but slippage (positive or negative) is possible — especially around news. It’s the common model for brokers that route to liquidity providers.
Micro account
An account designed for smaller position sizing, often allowing micro-lots as the standard behaviour. It’s aimed at traders with smaller balances who want realistic conditions without oversized exposure.
Always check whether the broker’s micro account has different spreads, instruments, or commissions.
N
No bonus account
An account type with no promotional credit attached. This typically means fewer restrictions around withdrawals because you’re not tied to turnover targets or bonus rules.
Traders who want “clean” conditions often choose no-bonus accounts to avoid admin surprises.
No deposit bonus
A promotion where the broker credits bonus funds without requiring an initial deposit. These bonuses usually come with strict eligibility rules, limited withdrawable profit, and trading-volume requirements.
They can be useful for trying a broker, but they’re rarely “free money” in the practical sense.
O
One-click trading
A platform feature that lets you open or close positions with a single click, often directly from the chart.
It’s useful for fast entries (scalping/news), but it increases the risk of accidental trades if sizing isn’t locked down. Best used with preset lot sizes and strict risk rules.
Q
Quick Trading
A broker/platform feature (often chart-based) that enables rapid order placement similar to one-click trading.
It’s designed to reduce the number of steps between decision and execution. Like one-click, it’s powerful — but easy to misuse if you don’t control sizing and stops.
S
Scalping
A trading style that targets very small moves, often holding trades for seconds to minutes. Because profits are small per trade, scalping is extremely sensitive to spreads, commission, slippage, and execution speed.
A broker that’s “fine” for swing trading can be expensive or impractical for scalping.
Strategy Manager
In copy trading, the trader whose strategy others follow. Strategy managers may be paid via performance fees, profit share, subscriptions, or platform rewards depending on the provider.
A key risk is that the manager can change behaviour — so past results don’t guarantee future risk control.
Swing trading
A trading style that holds positions for days to weeks, aiming to capture larger directional moves. It’s generally less dependent on ultra-fast execution than scalping, but swaps/financing and overnight news risk matter more.
Swing traders often use higher timeframes and wider stops.
T
Tick chart
A chart that forms new “bars” based on a set number of ticks (price updates) rather than a fixed time period. It can help traders see micro-structure and momentum changes more clearly in active markets.
Tick charts can be useful for timing, but they can also become noisy during low liquidity.
Trading credit
Bonus funds credited to your account that can increase usable margin but typically cannot be withdrawn like cash. Credit often comes with turnover requirements and expiry rules, and may be removed if you withdraw funds early.
Always treat trading credit as conditional, not as real balance.
Trading robot
A general term for an automated trading program that executes entries/exits based on rules (often an EA on MetaTrader). Robots can be fast and consistent, but they can also fail badly in market conditions they weren’t designed for.
Any robot should be tested, monitored, and capped with strict risk limits.
Trading signal provider
A service or trader that provides trade ideas or signals, either for manual copying or automated replication. Signals can help with structure and discipline, but they’re not a substitute for risk management.
The key is understanding sizing, stop placement, and whether the provider’s style matches your risk tolerance.
Turnover requirement
A bonus condition requiring you to trade a certain volume (lots) before bonus funds — or sometimes profits — become withdrawable. This can push traders into overtrading to “unlock” withdrawals, which often increases risk.
Always calculate what the required volume means in real trades and real cost.
V
Variable spread
Another label for floating spreads — your spread changes with liquidity and volatility. During calm periods, variable spreads can be very tight; around news they can widen dramatically.
When comparing brokers, look at typical spreads during your trading hours, not just the “from 0.0” headline.
W
WebTrader / Web terminal
A browser-based trading platform that runs without installing desktop software. It’s convenient for quick access on different devices, but features can be lighter than desktop (custom indicators, automation, advanced order tools).
Execution is still dependent on broker servers and market conditions.
Z
Zero spread account
An account type that advertises spreads from 0.0 on certain instruments, usually paired with a commission per lot.
It can be cost-effective for active traders if commission is reasonable and execution is strong. The only way to compare fairly is by “all-in cost” (spread + commission + slippage).