Glossary

Trading glossary

Plain-English definitions of the terms used across our lessons.

A

Ask: The price at which you can buy. It is always slightly higher than the bid.

Base currency: The first currency in a pair. In EUR/USD, the euro is the base.
Bid: The price at which you can sell.

CFD: Contract for difference: a product that lets you speculate on price movements without owning the underlying asset.
Consistency rule: A prop firm rule limiting how much of your total profit can come from a single day or trade.

Daily loss limit: The maximum a prop firm allows you to lose in a single trading day before the account is breached.
Drawdown: The decline from a peak in account value to a subsequent low.

Funded account: The account you receive after passing a prop firm evaluation, on which you earn a share of profits.
Funding rate: Periodic payments between long and short holders of perpetual futures.

Leverage: Borrowed exposure that lets you control a larger position than your deposit. It magnifies both gains and losses.
Liquidation: The forced closure of a leveraged position when losses use up the available margin.
Liquidity: How easily an asset can be bought or sold without moving its price.
Lot: A unit of position size. A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.

Margin: The deposit required to open and keep a leveraged position.
Margin call: A warning or automatic action when your account equity falls too close to the margin required for open positions.

Perpetual futures: Crypto futures contracts with no expiry date, kept close to the spot price by a funding rate.
Pip: The standard unit of price movement: 0.0001 for most currency pairs and 0.01 for JPY pairs.
Position sizing: Choosing trade size so that a stop-loss costs a fixed, planned amount of your account.
Profit split: The percentage of profits paid to the trader on a funded account.

Quote currency: The second currency in a pair, in which the price is expressed.

Risk-reward ratio: The potential gain of a trade compared with its potential loss, for example 1:2.

Seed phrase: The list of words that can restore a crypto wallet. Anyone who has it controls the funds.
Slippage: The difference between the price you expected and the price you actually received, common in fast markets.
Spread: The difference between the ask and the bid — a built-in cost of every trade.
Static drawdown: A maximum loss level fixed below the starting balance that does not move as you profit.
Stop-loss: An order that closes a trade at a set price to cap the loss.
Swap: The overnight financing charge or credit for holding a leveraged position past the daily rollover.

Take-profit: An order that closes a trade at a set price to lock in a gain.
Trailing drawdown: A maximum loss level that moves up as your balance or equity reaches new highs.