This glossary defines 80 terms you will meet when trading forex, futures and prop firm accounts. Each entry gives a short, plain definition, and many link to a full guide or free calculator on WizardTrader. Use the letter index to jump to a section.
A | B | C | D | E | F | I | L | M | N | O | P | Q | R | S | T | V | W
A
ATR (Average True Range)
A volatility indicator that measures the average range of price bars over a set period, commonly 14, including any gaps between bars. Traders use it to set stop distances and adjust position size; see our Average True Range indicator guide.
B
Backtesting
Testing a strategy's rules on historical price data to see how it would have performed. Results are only as good as the data and cost assumptions used; our guide on how to backtest a trading strategy covers the process.
Base currency
The first currency in a currency pair, such as EUR in EUR/USD. The price shows how much of the second currency one unit of the base currency buys; see currency pairs explained.
Bid and ask
The bid is the highest price a buyer will pay and the ask is the lowest price a seller will accept. You sell at the bid and buy at the ask, and the gap between them is the forex spread.
Bollinger Bands
An indicator made of a moving average with upper and lower bands set a number of standard deviations away, commonly 20 periods and 2 deviations. The bands widen in volatile markets and narrow in quiet ones; read our Bollinger Bands guide and see how they fit a mean reversion strategy.
Breakout
A move of price beyond a defined support, resistance or range boundary, often with rising volume. False breakouts are common, so many traders wait for confirmation; see our breakout trading strategy.
C
Candlestick
A chart bar that shows the open, high, low and close for a period, with a body between the open and close and wicks to the high and low. Patterns such as the pin bar reversal candle are built from one or more candles.
Challenge (evaluation)
The test phase a prop firm uses to assess a trader, usually requiring a profit target to be reached without breaking any loss limit. Some firms use one phase and others two or more; see how to pass a prop firm challenge.
Consistency rule
A prop firm rule that limits how much of total profit may come from a single day or trade, such as no one day exceeding a set share of the profits. It is designed to reward steady results rather than one large win.
cTrader
A trading platform offered by many ECN and STP forex brokers, known for its depth-of-market display, detailed order options and built-in algorithmic trading tools. Compare it with other platforms in our trading platforms comparison.
D
Daily loss limit
The maximum amount a prop firm account may lose in one trading day, measured from a starting balance or equity figure the firm defines. Breaching it usually fails the challenge or closes the funded account.
Divergence
When price and an oscillator move in opposite directions, such as price making a higher high while the oscillator makes a lower high. It can point to fading momentum but is not a precise timing signal; the stochastic oscillator is one common tool for spotting it.
Drawdown
The decline in account value from a peak to a later low, measured in money or percent. Use our drawdown calculator to see the gain needed to recover, and read about handling losing streaks in trading psychology.
E
E-mini
A family of electronically traded futures contracts on CME, such as the E-mini S&P 500 (ES) and E-mini Nasdaq-100 (NQ), sized smaller than the original full-size contracts. They are among the most liquid futures contracts in the world.
ECN (Electronic Communication Network)
An execution model in which orders are matched against prices from multiple liquidity providers, usually with raw spreads plus a separate commission. The broker does not take the other side of the client's trade.
End-of-day drawdown
A prop firm drawdown limit that trails the account's highest balance but is only recalculated at the close of each trading day. Open profits during the session do not raise the limit until the day ends.
Exotic pair
A currency pair that combines a major currency with the currency of a smaller or emerging economy, such as USD/TRY or EUR/ZAR. Exotic pairs tend to have wider spreads, thinner liquidity and larger price gaps.
Expectancy
The average amount a strategy is expected to make or lose per trade, calculated as win rate times average win minus loss rate times average loss. A strategy needs positive expectancy to be profitable over many trades.
Expiry
The date on which a futures or options contract ends and is settled, either in cash or by physical delivery. Most speculative traders close or roll their positions before expiry.
F
Fibonacci retracement
A tool that draws horizontal levels at 23.6%, 38.2%, 50%, 61.8% and 78.6% of a prior price swing to mark possible pullback zones. See our Fibonacci retracement guide or work out levels with the Fibonacci calculator.
Funded account
A prop firm account, often simulated, that a trader receives after passing an evaluation, with profits shared under the firm's rules. Read what a prop firm is to understand how the model works.
Futures contract
A standardised, exchange-traded agreement to buy or sell an asset at a set price on a future date. Contract size, tick size and expiry dates are fixed by the exchange; start with futures trading for beginners.
I
Ichimoku Cloud
An indicator system of five lines, including a shaded cloud, that shows trend direction, momentum and support and resistance in one view. Our Ichimoku Cloud guide explains each component.
Initial margin
The amount of money an exchange or broker requires to open a futures position. It is a good-faith deposit rather than the cost of the contract; see how leverage and margin work.
L
Leverage
Borrowed exposure that lets you control a position larger than your deposit, expressed as a ratio such as 30:1. Leverage magnifies both gains and losses; see leverage and margin explained.
Limit order
An order to buy at or below a set price, or to sell at or above a set price. It controls the price you get but does not guarantee the order will be filled.
Liquidity
How easily an asset can be bought or sold without moving its price much. Forex liquidity is usually highest when major trading sessions overlap; see our guide to forex market hours.
Lot
The standard unit of trade size in forex: a standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. See what a lot is in forex.
M
MACD
Moving Average Convergence Divergence, a momentum indicator built from the gap between two exponential moving averages, commonly 12 and 26 periods, plus a signal line, commonly 9. Crossovers and histogram changes are read as shifts in momentum; see our MACD indicator guide.
Maintenance margin
The minimum equity that must be kept in a futures account to hold an open position. If equity falls below it, the trader faces a margin call and must restore the account to the initial margin level.
Major pair
One of the most traded currency pairs, each including the US dollar, such as EUR/USD, USD/JPY, GBP/USD and USD/CHF. Majors usually have the tightest spreads; read more about major, minor and exotic currency pairs.
Margin
The deposit a broker holds to keep a leveraged position open, often shown as a percentage of the position's value. Work out the requirement for a trade with our margin calculator.
Margin call
A warning that account equity has fallen close to or below the margin required to keep positions open. The trader must add funds or reduce positions, or the broker may start closing trades.
Market maker
A broker or dealer that quotes both bid and ask prices and may take the other side of client trades. Market maker accounts often have fixed spreads and no separate commission.
Market order
An order to buy or sell immediately at the best available price. It guarantees execution but not the exact fill price, so slippage is possible.
Max drawdown
In prop trading, the largest total loss an account may reach before it is breached, set either from the starting balance or trailing the account's high point. Plan your buffer with our prop firm drawdown calculator.
Micro contract
A futures contract sized at one tenth of its E-mini equivalent, such as the Micro E-mini S&P 500 (MES). Micro contracts let traders take smaller positions with lower margin and a smaller tick value.
Minor pair
A currency pair that does not include the US dollar, such as EUR/GBP or AUD/JPY, also called a cross pair. Minor pairs usually have wider spreads than the majors.
Moving average
The average price over a set number of bars, plotted as a line that smooths out price action. A simple moving average weights every bar equally, while an exponential moving average gives more weight to recent bars; see our SMA and EMA guide.
MT4 (MetaTrader 4)
A widely used forex trading platform from MetaQuotes, with built-in charting, indicators and Expert Advisors written in the MQL4 language. It remains supported by a large number of brokers and prop firms.
MT5 (MetaTrader 5)
The successor to MT4, with support for more asset classes and timeframes, a depth-of-market view and the MQL5 language for automated trading. MT4 and MT5 code is not directly compatible; see how they compare in our MT4, MT5 and cTrader platform comparison.
N
NinjaTrader
A futures-focused trading platform and brokerage with advanced charting, simulation, order flow tools and NinjaScript for custom indicators and strategies. Many futures prop firms support it.
O
OBV (On-Balance Volume)
A running volume total that adds a bar's volume when price closes higher and subtracts it when price closes lower. Traders watch whether OBV confirms or diverges from price; see our On-Balance Volume guide.
Opening range breakout
A strategy that marks the high and low of the first minutes of a session and trades a break above or below that range. Read our opening range breakout strategy for rules and examples.
P
Payout
A withdrawal of profit from a funded prop firm account. Firms set their own payout schedules, minimum amounts and conditions that must be met before a request is approved.
Pip
The standard unit of price movement in forex, equal to 0.0001 for most pairs and 0.01 for JPY pairs. Learn how pips are counted in what a pip is.
Pip value
The money value of a one-pip move for a given position size; for EUR/USD it is $10 per standard lot. Use the pip value calculator for other pairs, or the forex profit calculator to turn pips into profit or loss.
Pipette
A fractional pip equal to one tenth of a pip, shown as the fifth decimal place on most pairs and the third on JPY pairs. Many brokers quote prices to the pipette.
Position sizing
Choosing how many lots or contracts to trade so that hitting the stop loss costs a fixed, acceptable amount, such as 1% of the account. Our position size calculator does the math, and the compound interest calculator shows how percentage-based sizing compounds over time.
Profit split
The share of funded-account profits paid to the trader, with the remainder kept by the prop firm, for example 80/20. Some firms raise the trader's share after set milestones.
Profit target
The amount of profit a trader must reach to pass a prop firm challenge phase, usually set as a percentage of the starting balance. It must be reached without breaching any loss limit.
Prop firm
A proprietary trading firm that provides capital, often simulated, to traders who pass an evaluation, in exchange for a share of the profits. See our guide to what a prop firm is and how it works.
Q
Quote currency
The second currency in a pair, such as USD in EUR/USD. Prices and pip values are expressed in the quote currency.
R
Refundable fee
A challenge fee that a prop firm returns to the trader, usually with the first payout from the funded account. Terms differ between firms, so check when and how the refund is paid.
Requote
A broker's offer of a new price when the requested price is no longer available at the moment of execution. Requotes happen mainly on instant-execution or market maker accounts during fast markets.
Resistance
A price area where selling has previously stopped advances. Once broken, old resistance often acts as support; see our guide to support and resistance.
Risk management
The rules a trader uses to limit losses, including position size, stop placement, daily loss limits and exposure across trades. Our guide to risk management in trading covers the core rules.
Risk/reward ratio
The potential loss on a trade compared with its potential gain, such as 1:2 when risking $100 to target $200. Check a trade setup with our risk/reward calculator.
Rollover (futures)
Closing a position in an expiring futures contract and opening the same position in the next contract month. Traders roll to keep their exposure without going through settlement or delivery.
RSI (Relative Strength Index)
A momentum oscillator that ranges from 0 to 100 and is commonly calculated over 14 periods. Readings above 70 are often called overbought and below 30 oversold; see our RSI indicator guide.
S
Scaling plan
A prop firm program that increases a trader's account size after set conditions are met, such as consistent profits over several months. It may also raise the profit split.
Slippage
The difference between the expected price of an order and the price at which it is actually filled. It is most common in fast markets, around news releases and with market or stop orders.
Spread
The difference between the bid and ask price, and one of the main costs of trading. Short-term styles such as a scalping strategy are especially sensitive to it; see what spread is in forex.
Static drawdown
A prop firm drawdown limit fixed at a set level below the starting balance that does not move as the account grows. See how it differs in trailing vs static drawdown.
Stop loss
An order that closes a losing trade at a set price to cap the loss. It can fill at a worse price during gaps or fast markets; see how to set a stop loss and take profit.
Stop order
An order to buy above or sell below the current price that becomes a market order once that price is reached. It is used to enter breakouts or to exit losing trades.
Stop-out
The margin level at which a broker automatically starts closing positions, usually beginning with the largest losing trade, because equity no longer covers the required margin. It comes after the margin call level.
STP (Straight Through Processing)
An execution model in which the broker passes client orders to liquidity providers without a dealing desk. Trading costs are usually built into a marked-up spread.
Support
A price area where buying has previously stopped declines. Traders watch for reactions there; see support and resistance and the related supply and demand strategy.
Swap
The overnight interest charged or paid for holding a forex position past the daily rollover time, based on the interest rate difference between the two currencies. It is also called rollover in forex.
T
Take profit
An order that closes a winning trade at a set price to lock in the gain. It is often placed at a planned risk/reward target; see stop loss and take profit orders.
Tick
The minimum price movement of a futures contract, set by the exchange. For example, the E-mini S&P 500 moves in ticks of 0.25 index points.
Tick value
The money value of a one-tick move for one futures contract. For the E-mini S&P 500, one tick of 0.25 points is worth $12.50.
TradeLocker
A web-based trading platform with built-in TradingView charts, used by a number of forex brokers and prop firms as an alternative to MetaTrader.
TradingView
A web and app charting platform with a large indicator library, the Pine Script language for custom tools and a community for sharing ideas. Many brokers connect to it so trades can be placed directly from its charts.
Trailing drawdown
A prop firm drawdown limit that moves up as the account reaches new highs, so the allowed loss is measured from the peak rather than the starting balance. Read trailing vs static drawdown explained.
Trailing stop
A stop-loss order that follows price by a set distance as the trade moves in your favour but never moves back. Some traders set the distance as a multiple of ATR.
Trend
The general direction of price over time: higher highs and higher lows in an uptrend, lower highs and lower lows in a downtrend. See our trend following strategy.
V
VWAP (Volume Weighted Average Price)
The average price traded during a session weighted by volume, usually reset at the start of each day. Intraday traders use it as a fair-value reference; see our VWAP indicator guide.
W
Win rate
The percentage of trades that close in profit. A low win rate can still be profitable with a high enough risk/reward ratio, which is why tracking both in a trading journal matters.
Risk warning: Trading forex, futures and other leveraged products carries a high risk of loss and is not suitable for everyone. The definitions on this page are for education only and are not financial advice. Read our full risk disclaimer.