Forex Glossary

Leverage allows a trader to control a position that is larger than the cash they personally put down. This can make small market movements have a much larger effect on the trader's own money — leverage works in both directions, increasing gains, but also increasing losses.

Example: In an invented demo, a 1% adverse move on a 2,000-unit exposure produces a 20-unit price loss before costs, even if the initial margin is only 100.

Keep in mind: Margin is not the exposure amount and not a guaranteed loss ceiling.

• Read in context: Money at Risk: Leverage, Losses and Demo Accounts

An instruction permitting a purchase at a stated maximum price or lower, or a sale at a stated minimum price or higher.

Example: A buyer says, I will pay 50 or less for the chair; if no seller qualifies, no purchase occurs.

Keep in mind: A chart touching the level is not proof that the correct executable side and available quantity qualified.

• Read in context: Order types and exits

How readily a transaction of a given size can be arranged at available prices without a large price impact. High total market activity does not guarantee liquidity for your exact pair, size, provider, and moment.

Example: A shop may easily handle one customer’s small order but need different terms for a very large order.

Keep in mind: A broad description of market activity does not establish your exact available execution.

• Read in context: Market participants

An account where transactions involve real funds rather than simulated practice money. Its actual product terms, costs and risks apply.

Example: An incorrect order in a practice account changes a simulated balance; the same mistake in a live account can affect real money.

Keep in mind: Passing a demo exercise is not proof that live trading is suitable or profitable.

• Read in context: Money at Risk: Leverage, Losses and Demo Accounts

A position that buys the base currency and sells the quote currency of a pair. Its price exposure benefits from a rise in the pair, before costs.

Example: The price-direction idea resembles buying something first and hoping to sell it for more later.

Keep in mind: The analogy does not replace the contract terms, executable prices or costs.

• Read in context: Pips and lots

Using information in a historical decision that was not available at that decision’s stated time.

Example: A Tuesday simulation uses a report only published on Friday, even though its positions are dated Tuesday.

Keep in mind: Observation dates, publication times, revisions and confirmation delays must all respect the cutoff.

• Read in context: Test without looking ahead

A sequence of consecutive losses under a consistent definition of a counted outcome.

Example: An invented practice log records three qualifying losses in succession.

Keep in mind: The next outcome does not owe repayment; the streak alone cannot identify whether the method or conditions changed.

• Read in context: Combined exposure and losing streaks

A tendency for losses to carry more weight than comparable gains around a reference point. Responses differ across people and situations.

Example: A learner notices that losing 5 feels more upsetting than gaining 5 feels pleasing, then records the actual decisions this feeling affected.

Keep in mind: A feeling is not proof of a bias-driven action or a reason to override a valid exit rule.

• Read in context: How thinking can go wrong

Position size is the quantity involved in a position; a lot is a unit used to express that quantity. Conventional Forex standard, mini and micro lots often represent 100,000, 10,000 and 1,000 base currency units respectively. Check the actual contract specification.

Example: Choosing one packet or ten packets illustrates why quantity changes the amount involved.

Keep in mind: Keep the lot convention, currency units, margin and loss scenario distinct.

• Read in context: Pips and lots

A selected high below a previous comparable selected high under the same observation rule.

Example: Invented confirmed highs of 12 then 11 show a lower high.

Keep in mind: A lower high is a description of selected observations, not a guarantee of further decline.

• Read in context: Describe structure without guessing

A selected low below a previous comparable selected low under the same observation rule.

Example: Invented confirmed lows of 8 then 6 show a lower low.

Keep in mind: A forming or unconfirmed low must not be treated as a confirmed observation.

• Read in context: Describe structure without guessing