Forex glossary

Base currency: The primary currency that you are trading or interested in. e.g. in aEURUSD currency pair, Euro (EUR) is the base currency and USD is called the quote currency

Counter currency: Same as the quote currency or second currency in a pair

Buy price (Ask rate): The price at which a buyer can buy a pair

Forex: Foreign Exchange or FX

Leverage: Leverage the loan from your broker that allows you to trade 100 or 200 times of your capital. E.g. it is possible for you to buy 10000 USDEUR with even $100 by applying the right leverage size. This can potentially increase your gains multifold but has the risk of loosing as well.

Lot: Lot is the standard unit of trading. Typically the standard lots are 100,000 units, mini-lots are 10,000 units and micro-lots 1000 units.

Open position: Your current holdings or trades that are not closed yet.

Pip: Pip (or Point) is the smallest price change that can be made on a currency pair quote. For most currencies (except for JPY combinations), the pip is usually a basis point or 0.0001. Hence the price movements are always in units of 0.0001 and smaller values than that. It may be noted that most forex quotes are in four decimal places.

Sell price (Bid rate): The price at which a pair can be sold

Short Position: Going short means that you are opening sell order hoping that the prices of a currency pair will fall. Later you can close that position at lower prices thereby booking profit.

Spread: Difference between the current buy and sell prices.

Stop Loss: The automatic closure price specified just in case your pair moves the other direction than expected. The stop loss order makes sure that you are protected from further losses by automatically closing the open positions at that specified stop loss price.