Lexicon

The Praevis Lexicon

Every term used on this site, in plain language. Testing yourself? Try the stage quizzes.

Ask

The price at which you can buy; the higher of the two quoted prices.

ATR (average true range)

A measure of how much a market moves per period, used to set stops and size positions.

Base currency

The first currency in a pair; the one you are buying or selling.

Bear market

A sustained decline, conventionally 20 percent from a high.

Bid

The price at which you can sell; the lower of the two quoted prices.

Breakout

A move beyond a defined range or level.

Bull market

A sustained rise.

Carry

The interest earned or paid for holding a position overnight, from the rate differential between two currencies.

CFD

Contract for difference; a leveraged agreement to exchange the change in an asset’s price without owning it.

Consensus

The median forecast for an economic release.

Core inflation

Inflation excluding food and energy; the measure central banks focus on.

Dovish

Language or policy leaning toward lower rates or looser conditions.

Drawdown

The decline from a peak in account value to the following low.

ECN

A broker model that routes orders to external liquidity providers.

ETF

A fund that trades on an exchange like a share and tracks an index or asset.

Financing (swap)

The daily charge or credit for holding a leveraged position overnight.

Hawkish

Language or policy leaning toward higher rates or tighter conditions.

Leverage

Trading a position larger than the money deposited.

Limit order

An order to buy or sell at a specified price or better.

Liquidity

How easily an asset can be traded without moving its price.

Lot

A standard trade size; in forex, 100,000 units of the base currency.

Margin

The deposit required to open a leveraged position.

Margin call / stop-out

A warning, then a forced closure, when account equity falls below the required margin.

Market order

An order to trade immediately at the best available price.

Moving average

The average price over a set number of periods, plotted as a line.

Pip

The standard unit of forex price movement, usually 0.0001.

PMI

Purchasing managers’ index; a monthly business survey where 50 separates growth from contraction.

Position size

The amount traded, calculated from risk per trade and stop distance.

Resistance

A level where selling has previously stopped a rise.

Risk-reward ratio

Potential profit compared with potential loss on a trade.

RSI

Relative strength index; a momentum oscillator between 0 and 100.

Slippage

The difference between the expected and actual fill price.

Spread

The gap between bid and ask.

Stop-loss

An order that closes a position at a set level to limit loss.

Support

A level where buying has previously stopped a fall.

Trailing stop

A stop-loss that moves with the price in your favour.

Volatility

How much and how fast prices move.