Trading Glossary

A pip (percentage in point or price interest point) is the smallest price movement in a currency pair. For most major pairs, a pip is the fourth decimal place (0.0001), while for yen pairs it's the second decimal place (0.01).

The spread is the difference between the bid price (what buyers are willing to pay) and the ask price (what sellers are asking for) of a currency pair. It represents the cost of trading and varies by broker and market conditions.

Leverage allows traders to control larger positions with smaller amounts of capital. It's expressed as a ratio (e.g., 100:1) meaning you can control $100,000 with $1,000. While leverage amplifies profits, it also magnifies losses.

Margin is the deposit required to open a leveraged position. It's expressed as a percentage of the total position size. For example, 1% margin means you need $1,000 to control a $100,000 position.

A currency pair represents the exchange rate between two currencies. The first currency is the base currency, and the second is the quote currency. The price shows how much of the quote currency is needed to buy one unit of the base currency.

The base currency is the first currency in a currency pair. It's the currency being bought or sold. When you buy a currency pair, you're buying the base currency and selling the quote currency.

The quote currency is the second currency in a currency pair. It represents the value of the base currency and shows how much of the quote currency is needed to purchase one unit of the base currency.

A long position means buying a currency pair with the expectation that its value will rise. When you go long, you buy the base currency and sell the quote currency, profiting if the exchange rate increases.

A short position means selling a currency pair with the expectation that its value will fall. When you go short, you sell the base currency and buy the quote currency, profiting if the exchange rate decreases.