This trading glossary collects the terms used across GalaxyHedge, from currency quotes and margin to dividends and private keys. Choose a letter to jump, or read it through as a short course in market vocabulary.
- Ask
- The price at which a dealer or the market will sell to you; you buy at the ask. It is always higher than the bid, and the gap between them is the spread.
- Base currency
- The first currency in a pair. In GBP/USD the pound is the base, and the quote shows how many dollars one pound costs. Lot sizes are counted in units of the base currency.
- Bid
- The price at which a dealer or the market will buy from you; you sell at the bid.
- Blockchain
- A shared ledger of transactions, grouped into linked blocks and copied across many computers so that past records are very hard to alter. See how crypto works.
- Clone firm
- A fraudulent business that copies the name, address or registration number of a genuine authorised firm to appear legitimate. Always contact firms using the details on the regulator's register.
- Contract for difference (CFD)
- An agreement with a broker to exchange the change in an asset's price, without owning the asset. CFDs are leveraged and, in the UK and EU, subject to retail leverage caps and negative balance protection.
- Cross pair
- A currency pair that does not include the US dollar, such as EUR/GBP or GBP/JPY. Pip values on crosses must be converted into dollars using another rate.
- Custody
- Safekeeping of assets on someone's behalf. With crypto, whoever holds the private keys has custody.
- Dividend
- A cash payment a company makes to its shareholders out of profits. Dividends can be raised, cut or stopped.
- Divisor
- The number used to turn the sum of share prices into an index level in a price-weighted index such as the Dow Jones Industrial Average. It is adjusted for splits and membership changes. See DJIA today.
- Equity
- In a trading account, the balance plus or minus the profit or loss on open positions. In company terms, ownership, as in shares.
- ERC20
- The token standard used on Ethereum. ERC20 addresses begin with 0x, and fees are paid in ether.
- Exchange-traded fund (ETF)
- A fund whose units trade on a stock exchange like shares, often tracking an index. It charges a yearly ongoing fee.
- Halving
- The scheduled cut, every 210,000 blocks or about four years, in the number of new bitcoins paid to miners per block. The reward became 3.125 BTC in April 2024. See what Bitcoin is.
- Hedge
- A position taken to reduce an existing risk, such as a currency forward that offsets the exchange-rate exposure of foreign shares. A hedge usually has a cost and gives up some potential gain.
- Index
- A number that tracks the combined value of a basket of shares or other assets, such as the S&P 500 or FTSE 100, to summarise how a market is moving.
- Leverage
- Controlling a position larger than the money deposited, expressed as a ratio such as 30:1. It magnifies both gains and losses. See the margin calculator.
- Limit order
- An instruction to buy or sell only at a specified price or better. It controls price but may not be filled.
- Liquidity
- How easily something can be bought or sold without moving its price. Major currency pairs are very liquid; small tokens and exotic pairs often are not.
- Lot
- The standard unit of position size in forex: 100,000 units of the base currency for a standard lot, 10,000 for a mini lot and 1,000 for a micro lot. Gold lots are commonly 100 ounces.
- Margin
- The part of your balance a broker sets aside as a deposit while a leveraged position is open. It equals the position value divided by the leverage.
- Margin level
- Equity divided by margin in use, as a percentage. UK and EU rules require brokers to start closing retail positions when it reaches 50%.
- Market order
- An instruction to buy or sell immediately at the best available price, which may differ from the last price you saw.
- Negative balance protection
- A rule that stops retail clients losing more than the money in their account. It applies to retail CFD clients in the UK and EU.
- Order book
- The live list of buy and sell orders for an asset at each price on an exchange or platform.
- Pip
- The standard unit of movement in an exchange rate: 0.0001 on most pairs and 0.01 on yen pairs. See the pip calculator.
- Price-weighted index
- An index in which higher-priced shares carry more weight regardless of company size, such as the Dow Jones Industrial Average and the Nikkei 225.
- Private key
- The secret that authorises spending from a crypto address. Anyone who has it controls the funds; it should never be shared.
- Quote currency
- The second currency in a pair, in which the price is expressed. In EUR/USD, the dollar is the quote currency.
- Recovery phrase
- A list of 12 or 24 words that backs up a crypto wallet's keys. Anyone asking for it is attempting theft.
- Rollover
- The daily process, at 17:00 New York time, of carrying open forex positions to the next value date, when swaps are applied.
- Segregated account
- A bank account in which a firm holds client money separately from its own, so it is not used to pay the firm's creditors.
- Settlement
- The moment ownership and payment actually change hands after a trade. US shares settle one business day after the trade (T+1).
- Slippage
- The difference between the price you expected and the price at which an order was filled, common in fast markets and around news.
- Spread
- The gap between the bid and ask prices, and the first cost of any trade. See trading fees explained.
- Stablecoin
- A crypto token designed to hold a steady value, usually one US dollar, backed by reserves held by an issuer. See USDT explained.
- Stop-loss order
- An instruction to close a position once the price reaches a set level, to limit losses. In a gap it can fill at a worse price.
- Swap
- The overnight financing charged or paid on leveraged positions held past the daily rollover; three days are usually applied on Wednesday.
- TRC20
- The token standard on the Tron blockchain. TRC20 addresses begin with T, and it is a common network for USDT transfers.
- Volatility
- How much and how quickly a price moves. Higher volatility means larger possible gains and losses over short periods.
Terms that are easy to confuse
Several pairs of words in this trading glossary sound alike but mean quite different things. Mixing them up is a common source of costly mistakes.
Margin and equity
Margin is the slice of your money a broker locks away while a leveraged trade is open. Equity is what the whole account is worth right now, including unrealised profits and losses. When equity falls towards the margin in use, the margin level drops and the broker may close positions for you. The margin calculator shows both sides of that ratio.
Spread and swap
The spread is paid once, when a position opens, as the gap between buying and selling prices. The swap is paid, or occasionally received, every night the position stays open. For a trade held for weeks, the swap usually matters more; our fees guide works through an example.
Leverage and risk
Leverage describes how large a position is compared with the deposit behind it. Risk describes how much you could lose. A trader can use high leverage with a small position and lose little, or low leverage with a huge position and lose a lot. Size positions from the loss you can accept, using the lot size calculator.
Stablecoin and bank deposit
Both aim to hold a steady dollar value, but a bank deposit is a claim on a licensed bank and is usually covered by a national protection scheme, while a stablecoin is a claim on a private issuer's reserves with no such cover. See what USDT is.
Exchange and broker
An exchange is the venue where buy and sell orders meet under public rules. A broker is the firm that holds your account and gives you access, and in products such as CFDs it may take the other side of your trade itself. Crypto platforms often call themselves exchanges while also acting as broker and custodian at once.
Price index and total-return index
A price index, such as the Dow Jones Industrial Average or the FTSE 100, tracks share prices only. A total-return index, such as Germany's DAX, assumes dividends are reinvested, so over long periods it climbs faster. Comparing the two directly exaggerates the difference between markets.
Three numbers worth remembering
- $10: the value of one pip on one standard lot of any pair quoted in US dollars.
- 50%: the margin level at which UK and EU brokers must start closing a retail client's positions.
- 21 million: the maximum number of bitcoins the protocol allows.
For fuller explanations, start with how forex trading works, the stock market for beginners and how crypto works, or browse the beginner FAQ.