Forex Trading Glossary

The difference between the bid (sell) price and the ask (buy) price of a financial instrument — the broker's primary cost.

Electronic Communication Network — a broker model that routes orders to external liquidity providers instead of filling in-house.

The difference between the price you expected to fill at and the price you actually filled at — usually negative during volatility.

A Tier-1 bank, prime broker, or inter-bank ECN that quotes bid/ask prices to retail brokers — the wholesale source of forex liquidity.

A multiplier on your deposit that lets you control a position larger than your capital — 1:30 means $30 of position per $1 of margin.

The peak-to-trough decline in an account's equity, usually expressed as a percentage of the peak.

An automatic order that closes a position at a pre-set price to cap loss — the foundational risk-management tool.

An automatic order that closes a position at a pre-set profit level — locks in gains without monitoring.

A broker alert (or forced closure) when your account equity falls below the margin required to maintain open positions.

The ratio between the dollars risked and dollars targeted on a trade — 1:2 means risking $1 to potentially make $2.

A maximum-loss floor that follows the account's peak equity upward — so giving back profit can breach it even while still in profit.

The maximum a prop firm account may lose in a single trading day — typically 4-5%, reset at a fixed server time.

A fixed maximum-loss floor on a prop firm account — set once at the start and never trails upward with profit.

A standardized position size in forex. 1 standard lot = 100,000 units of the base currency. Mini = 10,000. Micro = 1,000. Cent = 100.

The interest paid (or earned) for holding a forex position past the daily 17:00 ET rollover.

A per-lot cashback paid to the trader from the broker's IB commission — typically $2-$15 per standard lot.

A company that provides trading capital ($5k-$4M) to individuals who pass a paid evaluation called a "Challenge."

The share of trading profits a prop-firm-funded trader keeps — typically 80-90%, with the firm taking the remainder.

The paid test phase a trader must pass to earn a funded prop firm account — hit a profit target without breaching the drawdown rules.

A live prop firm trading account, backed by the firm's capital, granted to a trader after they pass the evaluation.

The withdrawal of a trader's profit share from a funded prop firm account, paid on a fixed cycle.

The profit a trader must reach in a prop firm evaluation phase to pass — typically 8-10% of the account size.

A prop firm program that increases a funded trader's account size as they hit consistent payout and profit milestones.

A prop firm rule that rejects a pass if too much of the total profit came from a single day or trade — forcing steady, repeatable results.

A prop firm rule that bans opening or holding positions during the minutes around a high-impact economic news release.

The second evaluation phase on a two-step prop firm challenge — usually a smaller profit target proving the Phase 1 pass was repeatable.

A discounted fee — typically 50-70% of the original challenge price — paid to immediately retry a failed prop firm evaluation without buying a brand-new account.

The minimum number of separate days a trader must place at least one trade during a prop firm evaluation — typically 4 to 10 days.

The smallest standardized price move on a forex pair — 0.0001 on most pairs, 0.01 on JPY pairs.

The depth of buyers and sellers in a market — high liquidity = tight spreads, easy fills; low liquidity = wide spreads, slippage.

The magnitude of price changes over time — measured most commonly as the standard deviation of daily returns.

One of four major forex trading windows defined by financial center business hours — Sydney, Tokyo, London, New York.

Analysis of economic data, central bank policy, and macro events to predict currency movements — the macro complement to technical analysis.

Analysis of price charts and indicators to predict future price movements — the chart-driven complement to fundamental analysis.

A trading style that takes many small profits from very short holding periods — typically seconds to minutes per trade.

A trading style that holds positions for hours to multiple days, targeting larger directional moves on higher timeframes.

An automated trading program for MetaTrader 4/5 that executes trades based on pre-programmed rules.

A trading framework based on identifying institutional order flow — liquidity grabs, order blocks, and market structure shifts.

A consolidation zone on a chart where institutional traders are believed to have accumulated positions before a directional move.

The last opposite-direction candle before a strong displacement — marking the zone where institutions positioned before pushing price. Used as a high-probability entry zone on retest.

A 3-candle inefficiency where the wicks of candle 1 and candle 3 do not overlap — a price gap the algorithm tends to return and rebalance. FVGs are inefficiencies, not liquidity.

Clusters of resting orders — stops above swing highs (buyside) and below swing lows (sellside) — that act as magnets for price. Smart money raids these pools before reversing.

The three-phase anatomy of a candle: Accumulation (range near open), Manipulation (false move sweeping stops), Distribution (the true move into the close). Repeats on daily and weekly candles.

A liquidity-sweep reversal setup: wait for price to sweep a time-based liquidity level (TBL, NWOG), then enter on the CISD or FVG retest for a 1.5-2R move against the false break.

A failed Order Block that price has broken through — it flips polarity and acts as support/resistance from the opposite side when revisited.

The high-probability time windows ICT setups are traded in — London Killzone (2-5 AM ET) and New York Killzone (7-10 AM ET) — when institutional volume actually moves price.

A price-action framework that reads charts through institutional order flow — liquidity raids, order blocks, fair value gaps, and market structure — popularized by the Inner Circle Trader (ICT).

An engineered false move — typically a sweep of the Asian range during the 12 AM-5 AM New York window — that traps traders on the wrong side before the day's true directional move.

The expected directional lean for the trading day — bullish, bearish, or no-bias — read from the previous day's high/low (PDH/PDL) and how the daily candle closed against them.

The ICT menu of institutional price zones — FVG, Volume Imbalance, IFVG, SIBI, BISI, Balanced Price Range, Order Blocks and Consequent Encroachment — always read against the premium/discount of the dealing range.