Forex glossary: key trading terms
Written by an ex-institutional trader. A plain-English glossary of the forex and CFD trading terms that matter, grouped by theme, with links to the full explainers where a term needs more than a sentence.
Direct answer
This glossary defines the forex and CFD trading terms an Australian trader actually needs, grouped into core concepts, costs, order types, analysis and account terms. The essentials are simple: a pip is the standard unit of price movement, the spread is the gap between buy and sell price, leverage lets a small deposit control a larger position, margin is the deposit required, and a lot is the standard position size.
Where a term carries enough weight to deserve a full explanation, with worked AUD examples, it links to a dedicated page. Use this as a quick reference, and follow the links for depth on the terms that matter most to how you trade.
Core concepts
The handful of ideas everything else rests on. Each of the linked terms has a full explainer with worked AUD examples.
- Forex (FX)
- The foreign exchange market, where currencies are traded against each other. See what is forex trading.
- Currency pair
- Two currencies quoted together, such as EUR/USD. The first is the base currency, the second the quote currency, and the price says how much of the quote one unit of the base is worth.
- Base currency
- The first currency in a pair, the one you are buying or selling. In AUD/USD, the Australian dollar is the base.
- Quote currency
- The second currency in a pair, the one the price is measured in. In AUD/USD, the US dollar is the quote.
- Pip
- The standard unit of price movement, usually the fourth decimal place. See what is a pip.
- Lot
- The standard unit of position size. A standard lot is 100,000 units; mini, micro and nano lots are smaller fractions. See what is a lot.
- Going long
- Buying a pair to profit from the base currency rising against the quote.
- Going short
- Selling a pair to profit from the base currency falling against the quote.
- Major pairs
- The most traded pairs, all involving the US dollar (EUR/USD, USD/JPY, GBP/USD, AUD/USD and others), with the tightest spreads.
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Costs and pricing
What you are actually charged, and the terms used to quote a price.
- Bid
- The price at which you can sell a pair. Always the lower of the two quoted prices.
- Ask (offer)
- The price at which you can buy a pair. Always the higher of the two quoted prices.
- Spread
- The gap between the bid and ask, and the broker's main charge. See what is spread.
- Commission
- A separate per-trade fee charged on raw-spread accounts, in exchange for near-zero spreads. Total cost is spread plus commission.
- Swap (rollover)
- The overnight interest paid or earned for holding a position, set by the rate gap between the two currencies. See what is swap.
- Leverage
- Borrowed exposure that lets a small deposit control a larger position, magnifying both gains and losses. Capped at 30:1 on majors under ASIC. See what is leverage.
- Margin
- The deposit the broker holds as collateral against a leveraged position. See what is margin.
- Pip value
- The money value of a one-pip move, which depends on position size and the pair. Work it out with the pip value calculator.
Orders and execution
The instructions you give the broker to enter and exit trades.
- Market order
- An instruction to buy or sell immediately at the best available price.
- Limit order
- An order to buy below or sell above the current price, used to enter at a better level or take profit.
- Stop loss
- An order that closes a losing trade automatically at a set level, capping the loss. The single most important risk-control tool.
- Take profit
- An order that closes a winning trade automatically at a set target.
- Stop out
- The automatic closure of positions by the broker when margin runs too low.
- Slippage
- The difference between the expected price of a trade and the price actually filled, common in fast markets.
- Margin call
- A warning that account equity is approaching the minimum margin, signalling that positions may be closed if it keeps falling.
- Leverage ratio
- The size of a position relative to the margin behind it, such as 30:1. Calculate exposure with the margin calculator.
Analysis terms
The vocabulary of reading a chart and forming a view.
- Technical analysis
- Studying price charts and patterns to anticipate moves, as opposed to studying economic data.
- Fundamental analysis
- Studying interest rates, economic data and central-bank policy to judge where a currency should head.
- Support
- A price level where falling prices tend to stop and bounce. See support and resistance.
- Resistance
- A price level where rising prices tend to stall and turn back.
- Trend
- A sustained directional move: higher highs and higher lows (uptrend) or the reverse (downtrend).
- Candlestick
- A chart element showing the open, high, low and close for a period. See candlestick patterns.
- Breakout
- Price pushing decisively through a support or resistance level, often starting a new move.
- Volatility
- How much and how fast a price moves. Higher volatility means bigger opportunities and bigger risk.
- Reward-to-risk ratio
- The size of a trade's potential profit relative to its potential loss. Above 1 lets you profit with a sub-50 percent win rate.
Account and regulation
The terms that frame how and where you trade safely in Australia.
- CFD
- Contract for difference: the instrument most Australian retail traders use to trade forex without owning the currency, allowing leverage and short selling.
- ASIC
- The Australian Securities and Investments Commission, the regulator that licenses brokers and sets the leverage caps and consumer protections.
- AFSL
- Australian Financial Services Licence, the licence a broker must hold to serve Australian clients legally.
- Negative balance protection
- An ASIC requirement that retail traders cannot lose more than their account balance.
- Segregated funds
- Client money held in accounts separate from the broker's own funds, protecting it if the broker fails.
- Demo account
- A practice account with virtual money, used to learn a platform and test a strategy at no risk.
- Raw-spread account
- An account type offering near-zero spreads in exchange for a fixed commission, favoured by active and short-term traders.
- Equity
- The live value of your account including open profit and loss, as opposed to the settled balance.
Use this glossary as a reference and follow the links for depth. From here, the natural next steps are what is forex trading for the foundation, forex trading strategies for approach, and how to trade forex in Australia for the practical steps. When you are ready to open an account, compare cost and regulation on the best forex brokers in Australia ranking.
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Last reviewed: 2026-06-01.
Frequently asked questions
What are the most important forex terms for beginners?
The five that matter most are pip (the standard unit of price movement), spread (the gap between the buy and sell price, which is your main cost), leverage (borrowed exposure that lets a small deposit control a larger position), margin (the deposit the broker holds against that position), and lot (the standard position size). Understanding these five lets you read a quote, size a trade and understand what you are being charged. Everything else builds on them.
What is the difference between bid and ask in forex?
The bid is the price at which you can sell a currency pair, and the ask (or offer) is the price at which you can buy it. The ask is always slightly higher than the bid, and the difference between them is the spread, which is the broker's main charge. When you open a buy trade you pay the ask, and when you close it you receive the bid, so a trade starts marginally in the red by the size of the spread.
What does going long and going short mean?
Going long means buying a currency pair because you expect the base currency to rise against the quote currency, profiting if the price goes up. Going short means selling the pair because you expect the base currency to fall, profiting if the price goes down. The ability to go short as easily as long is a defining feature of forex and CFD trading, and it is why traders can profit in falling markets as well as rising ones.
What is a margin call?
A margin call is a warning from your broker that your account equity has fallen close to the minimum margin needed to keep your positions open, because the trades have moved against you. If the equity keeps falling, the broker will close positions automatically, called a stop out, to prevent your balance going negative. Under ASIC rules, retail brokers must also provide negative balance protection, so you cannot lose more than your account balance.
Is a forex glossary enough to start trading?
A glossary gives you the vocabulary, but vocabulary is not skill. Knowing what a pip and a stop loss are is necessary but not sufficient; profitable trading also requires risk management, a strategy, screen time and discipline, most of which only come from practice. Use the glossary to read charts and quotes confidently, then build real understanding through a demo account and the deeper guides before risking money. The terms are the start, not the finish.
