Forex glossary
Plain-English definitions with worked examples. Each entry links to the broker reviews and learn pieces where the term matters most.
risk
Drawdown Drawdown is the peak-to-trough decline in account equity during a specified period. It is the most important metric for evaluating both your own trading and copy-trading signal providers. Leverage Leverage lets you control a position larger than your deposit. At 30:1 leverage, $1,000 controls $30,000 of currency. It amplifies both gains and losses. Margin Margin is the collateral you must hold in your account to open and maintain a leveraged position. It is not a fee — it is a deposit held against potential losses.
pricing
Lot A lot is the standard unit of trade size in forex. One standard lot = 100,000 units of the base currency. Mini lots (10,000) and micro lots (1,000) allow smaller position sizes. Pip A pip is the smallest standard price movement of a currency pair. For most major pairs, one pip is the fourth decimal place (0.0001). For yen pairs, it is the second decimal place (0.01). Spread The spread is the difference between the buy price (ask) and the sell price (bid) of a currency pair. It is the primary cost of trading on commission-free platforms.