Trading glossary
Short, plain-English definitions of the terms you’ll meet across our broker reviews and guides. Use them to compare brokers with confidence.
Ad- CFD
- Contract for Difference: an agreement to exchange the price difference of an asset between open and close, without owning the underlying. Lets you go long or short with leverage.
- Copy trading
- A feature that automatically mirrors the trades of an experienced trader in your own account, in proportion to your capital.
- cTrader
- A trading platform popular with ECN traders for its depth-of-market view, fast execution and clean interface.
- Demo account
- A free practice account funded with virtual money, used to test a platform and a strategy with no financial risk.
- ECN
- Electronic Communication Network: an execution model that routes your orders directly to liquidity providers, giving raw spreads plus a transparent per-lot commission.
- KYC
- Know Your Customer: the identity-verification step (ID + proof of address) regulated brokers require before you can deposit and trade.
- Leverage
- A multiplier that lets you control a position larger than your capital (e.g. 1:500). It amplifies both potential gains and losses, so it must be used with risk controls.
- Lot
- A standardized trade size. In forex a standard lot is 100,000 units of the base currency; mini (0.1) and micro (0.01) lots let you trade smaller.
- Margin
- The capital a broker requires you to set aside to open a leveraged position. If your equity falls below the maintenance margin, positions can be closed automatically.
- Market maker
- A broker that takes the other side of your trade rather than passing it to the market. It can offer fixed spreads but creates a potential conflict of interest.
- Minimum deposit
- The smallest amount a broker requires to open a live account. Lower minimums (from $10) let beginners start small while they learn.
- MT4
- MetaTrader 4: the most widely used forex trading platform, known for charting, automated trading (EAs) and a huge ecosystem of tools.
- MT5
- MetaTrader 5: the successor to MT4, with more timeframes, order types and asset classes such as stocks and futures.
- Negative-balance protection
- A safeguard that prevents your account from going below zero, so you can never lose more than you deposited.
- PAMM
- Percentage Allocation Management Module: an account that pools investors’ funds under one money manager, distributing profits and losses by share.
- Pip
- The smallest standard price move in a currency pair, usually the fourth decimal (0.0001). Spreads and profits in forex are commonly measured in pips.
- Regulation / Tier-1
- Oversight by a financial authority. Tier-1 regulators (FCA, ASIC, CySEC, BaFin) impose the strictest capital, reporting and client-protection rules.
- Slippage
- The difference between the price you expected and the price your order actually filled at, common in fast or illiquid markets.
- Spread
- The difference between the buy (ask) and sell (bid) price of an instrument. It is the main cost of a commission-free trade — the tighter the spread, the cheaper it is to trade.
- Stop loss
- A pending order that closes a position once it reaches a set loss level, capping your downside on a trade.
- Swap
- The interest credited or debited for holding a leveraged position overnight. Swap-free (Islamic) accounts replace it with an admin fee.
- Take profit
- A pending order that closes a position automatically once it reaches a target profit level.