Trading has its own language. If you don't understand the terminology, you are trading blind. This is your living dictionary for the Forex market, explaining core concepts, particularly those related to **risk and execution**.
A - The Basics
Ask Price
The price at which you can **BUY** a currency pair. It is always higher than the Bid price.
Asian Session
The trading session that begins with Tokyo open (usually quiet volume). Pairs like JPY and AUD are most active here.
B - The Structure
Balance vs. Equity
- **Balance:** The money in your account *before* open trades are calculated.
- **Equity:** The real-time money you have *right now* (Balance + Floating Profits - Floating Losses).
Bid Price
The price at which you can **SELL** a currency pair.
Break of Structure (BOS)
An SMC term. When price breaks a previous High (in an uptrend) or Low (in a downtrend), **confirming the trend is continuing**.
C - The Market & Risk
CPI (Consumer Price Index)
A key **inflation** indicator. High CPI usually leads to higher interest rates, strengthening the currency.
CHOCH (Change of Character)
The first sign of a **reversal**. When an uptrend breaks its last "Higher Low", the character changes to Bearish.
D - Risk & Liquidity
Drawdown
The reduction of your capital after a series of losing trades. Usually expressed as a percentage.
F - Smart Money & Macro
Fair Value Gap (FVG)
Also known as **Imbalance**. A three-candle pattern where the first and third candles do not overlap, leaving a gap that price often returns to fill. (A footprint of institutional displacement).
FOMC
The **Federal Open Market Committee**. The branch of the US Federal Reserve that decides Interest Rates. This is the biggest **news event** in Forex.
L - Leverage, Lot Size, and Liquidity
Leverage
Borrowed capital from the broker. **It magnifies both wins and losses**. Higher leverage reduces margin usage.
Liquidity
Areas on the chart where many **Stop Losses** are sitting (usually above double tops or below double bottoms). **Banks target these areas** (Stop Hunts).
Lot Size
The volume of your trade. Lot size must be calculated based on your fixed risk percentage and Stop Loss distance. Use the Lot Size Calculator.
M - Margin & Danger
Margin Call
The nightmare. When your **Equity** falls below the required Margin level, the broker **forcibly closes your trades** (Stop-Out) to prevent further loss.
SVG 2: Leverage and Margin Mechanism
P - Price Action
Pip (Percentage in Point)
The smallest standard move in Forex. Usually the 4th decimal place. For Gold (XAUUSD), 10 cents move = 1 Pip.
Prop Firm
A company that lends you capital to trade in exchange for a split of the profits. (Requires strict risk management).
S - Execution & Style
Scalping
A trading style taking small profits on small timeframes (M1/M5) very quickly.
Slippage
The difference between the price you clicked and the price you actually got. Happens often during **high-impact news**.
Spread
The cost of the trade. The difference between Ask and Bid (Broker's cost/profit).
SVG 3: The Concept of Spread (Bid vs. Ask)
Swing Trading
Holding trades for days or weeks to catch a larger market move.
Final Thoughts
Understanding these terms is the first step to executing your strategy with precision and minimizing **risk**. Monitor the market via the Realtime Market Dashboard.
