Plain-English definitions of markets, forex, derivatives, gold and trading terms from across the course. Search or jump by letter.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Educational content only. Nothing here is a recommendation, and no result is guaranteed.
Taking advantage of a small price difference for the same asset in different places, aiming to take little risk.
Ask
The price at which you can BUY. It is always slightly higher than the bid.
B
Backtesting
Applying fixed rules to historical prices to see how they would have performed.
Backwardation
A market condition where futures prices are lower than the spot price.
Balance
The money in your account counting only closed trades. It does not change while a trade is open.
Base currency
The first currency in a pair, always counted as one unit.
Bearish
Expecting, or showing, falling prices.
Benchmark
An agreed reference grade or price, such as Brent crude, that others are quoted against.
Bid
The price at which you can SELL. It is always slightly lower than the ask.
Breakeven
A trade that finishes with no profit and no loss. Traders often move a stop loss to the entry price to aim for this (costs still apply).
Breakout
Price moving beyond a support or resistance level, ideally with a candle closing beyond it.
Bretton Woods
The 1944 agreement creating a dollar-centred system of fixed exchange rates linked to gold.
Bullish
Expecting, or showing, rising prices.
BUY (long)
A position that profits if the price rises and loses if it falls.
C
Candle body
The thick part of a candle between the open and the close.
Candlestick
A chart bar showing open, high, low and close for one time period.
Carry trade
Holding a higher yielding currency funded by a lower yielding one to earn the interest difference.
CFD (contract for difference)
A contract between you and a broker that follows the price of an asset without you owning it. CFDs are leveraged and high risk.
Channel
Two parallel trendlines enclosing the range price is moving in.
Clearing house
An organisation that stands between buyer and seller on an exchange to reduce counterparty risk.
Clone firm
A fraudulent firm that copies the name and details of a genuine authorised firm.
Commission
A fee some brokers charge per lot traded, on top of the spread.
Compounding
Earning returns on earlier returns, so growth builds on itself over time.
Consensus forecast
The average expectation of analysts for a data release.
Contango
A futures market where later contracts cost more than spot.
Contract size
How many units one lot represents. For XAUUSD it is commonly 100 troy ounces per 1.00 lot, but it varies by broker.
Copy trading
A service where a platform automatically copies another trader's trades into your account. It is different from signals, which are ideas you place yourself. The Gold Desk shares signals only and does not offer copy trading.
Correlation
A number between -1 and +1 showing how closely two assets move together.
Cost of carry
The net cost of holding an asset until a future date, including interest and storage.
Counterparty risk
The risk that the other side of a contract fails to pay what it owes.
Cross pair
A pair that does not include the US dollar, such as EURGBP.
Currency pair
Two currencies quoted against each other, such as EURUSD.
D
Death cross
A faster moving average crossing below a slower one, such as the 50 below the 200.
Demo account
A practice account that uses virtual money and real-time prices.
Derivative
A financial contract whose value is derived from an underlying asset, rate or index.
Diversification
Spreading money across different assets so one poor result matters less.
Drawdown
A fall in account value from a previous peak, usually shown as a percentage.
E
Economic calendar
A schedule of upcoming data releases and central bank events with forecasts.
Elasticity
How much supply or demand changes when price changes. Low elasticity means big price swings.
Entry
The price at which a trade is opened.
Equilibrium price
The price at which the amount buyers want matches the amount sellers offer.
Equity
Your balance plus or minus the floating profit or loss on open trades.
Exchange rate
The price of one currency expressed in another currency.
Exotic pair
A major currency paired with the currency of a smaller or emerging economy.
Expectancy
The average amount gained or lost per trade after costs.
F
False breakout
A move beyond a level that quickly reverses back inside it.
FCA Register
The FCA's public database of authorised firms and individuals.
Floating exchange rate
A currency price set by market supply and demand rather than fixed.
Floating profit/loss
The unrealised result of an open trade. It changes with every price tick until the trade is closed.
FOMO
Fear of missing out, the urge to enter after a fast move because you feel left behind.
Foreign exchange (forex, FX)
The market in which one currency is exchanged for another.
Foreign exchange reserves
Assets held by a central bank to support its currency and the financial system.
Forward
An agreement to exchange currencies at a fixed rate on a set future date.
Forward contract
A private agreement to buy or sell an asset at a set price on a future date.
Forward testing
Trading a set of rules in real time on demo without altering them.
Free margin
Equity minus the margin already in use. It is what is available to open more trades or absorb losses.
FSCS
The Financial Services Compensation Scheme, a UK last-resort scheme that may pay limited compensation if an authorised firm fails.
Fungible
Describes goods where one unit is interchangeable with another of the same grade.
Futures contract
A standardised exchange-traded agreement to buy or sell an asset at a set price on a future date.
FX swap
Two linked currency deals: an exchange now and a reverse exchange on a later date.
G
Gap
A jump in price between two levels with no trading in between, which can skip past stop-loss orders.
Gold standard
A monetary system in which currency is convertible into a fixed amount of gold.
Gold-backed fund
A fund holding physical gold in a vault and issuing shares that track its price.
Golden cross
A faster moving average crossing above a slower one, such as the 50 above the 200.
H
Hard commodity
A commodity that is mined or extracted, such as oil or metals.
Hedger
A market participant who trades to reduce a risk they already carry.
Hedging
Using a derivative to reduce an existing price risk, similar to buying insurance.
Hedging account
An MT5 account type where several positions on the same symbol can be open at once, including opposite directions.
I
Inside bar
A candle whose high and low sit within the previous candle's range, showing a pause.
L
Lag
The delay between a price move and an indicator's signal, because indicators use past prices.
Leverage
Controlling a larger position than your deposit by using borrowed exposure. It magnifies profits and losses equally.
Limit order
A pending order to buy at a lower price or sell at a higher price than the current market.
Liquidity
How easily something can be bought or sold without moving the price much.
Loss aversion
The tendency for losses to feel worse than equal gains feel good.
Lot
The standard unit of trade size. 1.00 lot is a standard lot, 0.10 is a mini lot, 0.01 is a micro lot at most brokers.
M
Maintenance margin
The minimum balance that must be kept on a futures account, below which a margin call is made.
Major pair
A heavily traded pair that includes the US dollar and another large currency.
Margin
The amount of your money set aside as a deposit to keep a leveraged trade open.
Margin call
A warning from the broker that your equity is low relative to the margin used. Trades may be closed automatically if it falls further (a stop-out).
Margin close-out
The automatic closing of positions by a broker when equity falls to a set share of the required margin.
Margin level
Equity divided by used margin, expressed as a percentage.
Mark-to-market
The daily recalculation and settlement of profits and losses on open futures positions.
Market maker
A firm that continuously quotes buy and sell prices and may take the other side of client trades.
Market order
An order to buy or sell immediately at the best available current price.
Marubozu
A candle with a long body and little or no wicks, showing one-sided control.
Moving average
The average closing price over a set number of periods, drawn as a smoothed line.
N
Negative balance protection
A rule or feature that stops a retail client losing more than the money in their account.
Netting account
An MT5 account type where only one position per symbol exists. Opposite trades reduce or reverse it.
Nixon shock
The 1971 US decision to end dollar convertibility into gold for foreign central banks.
O
OPEC
A group of oil producing countries that coordinates output policies.
Operating leverage
When fixed costs make a company's profits move more than the price of what it sells.
Oscillator
An indicator that swings within a range, such as RSI, to describe momentum.
Over the counter (OTC)
A market where deals are made directly between parties rather than on a central exchange.
Over-the-counter (OTC)
Trading directly between parties through dealer networks rather than on a central exchange.
Overbought
A label for an RSI reading above 70, meaning a strong recent rise that may be stretched.
Overconfidence
Excess belief in your ability, often after a short run of wins, leading to larger risks.
Overfitting
Tuning rules so closely to past data that they fail on new data.
Oversold
A label for an RSI reading below 30, meaning a strong recent fall that may be stretched.
P
Pending order
An order placed to trigger later when price reaches a chosen level (limit or stop orders).
Period
The number of candles used in an indicator calculation, such as 14 or 50.
Pip
The standard unit of price movement, usually 0.0001 or 0.01 for yen pairs.
Pip / point
Tiny units of price movement. Their size varies by instrument and broker, so check your broker's specification.
Pip value
The amount of money one pip is worth for a given position size.
Pipette
A tenth of a pip, the extra decimal place many brokers show.
Position size
How large a trade is, usually in lots.
Premium
The price an option buyer pays to the seller for the option.
Premium (physical gold)
The amount a dealer charges above the spot price for coins or bars.
Primary market
The market where new securities are first sold and the issuer receives the money.
Pullback
A temporary move against the main trend before it resumes.
Q
Quote currency
The second currency in a pair, in which the price is stated.
R
Recovery scam
A fraud that promises to retrieve money lost to an earlier scam for an upfront fee.
Requote
When a broker offers a new price after you have submitted an order.
Reserve currency
A currency held in large amounts by central banks, historically the US dollar.
Resistance
A price area where selling has previously stopped price from rising.
Retest
Price returning to a level it has just broken to see whether it holds.
Revenge trading
Opening trades to recover a loss rather than because a set-up has appeared.
Risk-to-reward ratio
The potential reward of a trade compared with the amount risked, for example 1 : 2.
Roll
Closing an expiring futures position and opening one in a later contract.
RSI (Relative Strength Index)
A momentum indicator from 0 to 100 often used to judge whether a move looks stretched.
S
Secondary market
The market where existing securities are bought and sold between investors.
SELL (short)
A position that profits if the price falls and loses if it rises.
Signal
A shared trade idea with a direction, entry, stop loss and take profit.
Slippage
The difference between the price you expected and the price you got.
Soft commodity
A commodity that is grown or raised, such as wheat, coffee or cattle.
Speculation
Taking a position on a price move to seek a gain, while accepting the risk of loss.
Spot rate
The exchange rate for immediate deal, with settlement normally about two business days later.
Spread
The gap between the bid and ask prices. It is a cost of every trade.
Stop loss (SL)
A preset exit that closes a trade at a chosen loss level.
Stop out
The automatic closing of positions by a broker when margin level falls too low.
Stop-out
Automatic closing of trades by the broker when margin level falls below a set threshold.
Strike price
The fixed price at which an option holder may buy or sell the underlying asset.
Support
A price area where buying has previously stopped price from falling.
Survivorship bias
A distortion from studying only the people or products that survived.
Swap
An overnight financing charge or credit for holding a leveraged position past the daily rollover.
Swing high
A peak where price turned down, with lower prices on both sides.
Swing low
A trough where price turned up, with higher prices on both sides.
T
Take profit (TP)
A preset exit that closes a trade at a chosen profit level.
Time decay
The steady fall in an option's time value as expiry approaches.
Timeframe
The period each candle represents, such as 5 minutes, 1 hour or 4 hours.
Trading journal
A record of each trade, the reasoning, the result and your emotions, used for review.
Trading plan
A written set of rules covering what you trade, entries, exits, risk limits and when to stop.
Trailing stop
A stop loss that follows price as it moves in your favour, but does not move back.
Trend
A sustained move in one direction, shown by higher highs and higher lows (up) or lower highs and lower lows (down).
Trendline
A straight line joining successive higher lows (uptrend) or lower highs (downtrend).
Troy ounce
The unit gold is priced in: about 31.1 grams.
U
Underlying asset
The asset, rate or index that a derivative's value follows, such as gold, oil or an interest rate.
V
Volatility
How much and how fast price moves. High volatility means bigger swings and more risk.
W
Whipsaw
A quick reversal that triggers a signal and then moves against it, common in sideways markets.
Wick (shadow)
The thin line on a candle showing the high or low reached beyond the body.
Win rate
The share of trades that finish in profit, which alone says little about profitability.
X
XAUUSD
The market code for gold priced in US dollars. XAU is one troy ounce of gold, USD is the US dollar.