PipWardenGlossary
Forex and MT5 glossary
The words you meet first in forex and MetaTrader 5, each explained in plain English with an example.
A
B
- BacktestingBacktesting is running a trading strategy's rules on historical price data to see how it would have traded in the past, including its trades, losing streaks and drawdown, before it is used on live prices.
- Bid and ask priceBid and ask price are the two sides of a quote: the bid is the price at which you can sell, the ask is the higher price at which you can buy, and the gap between them is the spread.
C
- Contract sizeContract size is the number of units that 1.00 lot represents, such as 100,000 units of the base currency on a forex pair or, at many brokers, 100 troy ounces of gold.
- CPI (Consumer Price Index)CPI (Consumer Price Index) is a measure of the average change over time in the prices consumers pay for a basket of goods and services; in forex it usually means the monthly US figure from the Bureau of Labor Statistics.
D
- Daily loss limitA daily loss limit is the maximum loss a trader or trading system accepts in one day, after which no new trades are opened until the next day starts.
- DrawdownDrawdown is the fall in an account's balance or equity from a peak to a later low, measured in money or as a percentage of that peak.
E
- EquityEquity is the current value of a trading account: the balance plus the floating profit or loss of all open positions.
- Expert Advisor (EA)An Expert Advisor (EA) is a program for the MetaTrader desktop terminal, written in MQL5 for MT5 or MQL4 for MT4, that runs on a chart and can analyse prices and open and manage trades automatically.
F
- FOMCThe FOMC (Federal Open Market Committee) is the Federal Reserve committee that sets US monetary policy, including the target range for the federal funds rate, at eight scheduled meetings a year.
- Forex VPSA forex VPS is a virtual private server, a virtual Windows machine rented in a data centre, that keeps MetaTrader and an Expert Advisor running while the market is open, without relying on a home PC.
G
H
K
L
- LeverageLeverage is the ratio between the size of a position and the margin needed to open it: at 30:1, $1,000 of margin opens a position worth $30,000.
- LotA lot is the unit of trade size in forex and MetaTrader 5: 1.00 lot of a currency pair is usually 100,000 units of the base currency, 0.10 lot is 10,000 units and 0.01 lot is 1,000 units.
M
- Magic numberA magic number is a whole-number ID that an Expert Advisor puts on the orders it sends in MetaTrader 5, so that the EA can tell its own positions apart from manual trades and other EAs' trades on the same account.
- MarginMargin is the part of a trader's equity that a broker sets aside as a deposit to open and hold a leveraged position, worked out from the position's size and the leverage.
- Margin callA margin call is a broker's warning that a trading account's margin level has fallen to the margin call level the broker set; on its own, it closes no positions.
- Margin levelMargin level is a trading account's equity divided by the margin in use, times 100: the percentage brokers watch to trigger margin calls and stop-outs.
- MartingaleMartingale is a money-management system that doubles the position size after every losing trade, so that one win recovers all earlier losses plus the first trade's profit, while the size and risk grow exponentially during a losing streak.
- Minimum lot size and volume stepMinimum lot size is the smallest trade volume a broker accepts for a symbol, often 0.01 lot on forex, and the volume step is the increment that every order size must be a whole multiple of.
N
- Negative balance protectionNegative balance protection is a rule, or a broker policy, that limits a retail client's losses on CFDs, including rolling spot forex, to the funds in the trading account, so a fast market cannot leave the client owing the broker money.
- News blackoutA news blackout is a time window before and after a high-impact economic release during which a trader or an automated trading system opens no new trades on the currencies involved, for example 60 minutes before and 30 after.
- NFP (Non-Farm Payrolls)NFP (Non-Farm Payrolls) is the monthly change in the number of paid jobs at US businesses and government agencies outside farming, published by the Bureau of Labor Statistics in its Employment Situation report at 8:30 a.m. New York time.
O
P
- PipA pip is the standard unit of price movement in a currency pair: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen.
- Point (MT5)A point in MetaTrader 5 is the smallest price step a symbol is quoted in, set by its number of digits: 0.00001 on a 5-digit EURUSD quote and 0.001 on a 3-digit USDJPY quote.
R
- Risk of ruinRisk of ruin is the probability that a run of losses takes a trading account down to a level defined as ruin, such as 20% below the starting balance, given an assumed win rate, payoff and risk per trade.
- Risk-reward ratioThe risk-reward ratio compares what a trade loses if its stop loss is hit with what it gains if its target is reached: a 25-pip stop and a 50-pip target is 1:2, or a reward-to-risk ratio of 2.
- RolloverRollover is the daily cut-off at 17:00 New York time, when the forex trading day ends, open positions are carried to the next value date and most brokers book the swap.
S
- SlippageSlippage is the difference between the price at which an order was requested or triggered and the price at which it was actually filled.
- SpreadSpread is the difference between the ask price and the bid price of a symbol, a cost paid on every trade because a position opens at one of the two prices and closes at the other.
- Stop lossA stop loss is an order attached to a position that closes it automatically when the price reaches a set level, to limit the loss on that trade.
- Stop-outA stop-out is the broker automatically closing open positions when an account's margin level (equity as a percentage of the margin in use) falls to a set threshold, the stop-out level, which is 50% for EU retail CFD clients.
- SwapA swap in forex is the interest a broker credits or charges for holding a position through the daily rollover, set per symbol and separately for long and short positions.
T
- Tick size and tick valueTick size is the minimum price change of a symbol, and tick value is what a move of one tick is worth on 1.00 lot, usually in the account currency.
- Trailing drawdownA trailing drawdown is a maximum-loss limit whose floor moves up with the account's highest balance or equity and never moves back down, unlike a static drawdown fixed from the starting balance.
W
- WebRequest (MT5)WebRequest is the MQL5 function that lets an Expert Advisor or script send HTTP requests to a web server, and MetaTrader 5 allows it only for addresses listed under Tools → Options → Expert Advisors.
- Weekend gapA weekend gap is a jump in price between Friday's close and the first quote after the weekend, with no trading at the levels in between.
Educational content, not financial advice. Forex and CFDs are traded on margin and are high risk: you can lose money, and more than your deposit with some brokers. Examples use made-up numbers and show no real results. Read the risk disclosure.