Forex Glossary
Plain-language definitions of the most common forex and CFD terms: spread, pip, leverage, margin, swap and more.
Risk warning. Leveraged forex trading carries high risk and in Türkiye may only be offered by SPK-authorised intermediaries; leverage is capped at 1:10 (half of that may apply if the initial margin at account opening is below TRY 50,000). This content is not investment advice; user statements belong to their authors.
Basics
- Forex
- Foreign exchange — the global market where currency pairs (e.g. EUR/USD, USD/TRY) are traded.
- CFD
- A leveraged derivative to trade an asset’s price difference without owning the underlying asset.
- Currency Pairs (Major/Minor/Exotic)
- Majors include USD and are the most liquid (EUR/USD); minors exclude USD; exotics include an emerging-market currency (USD/TRY) and are more volatile.
- Base & Quote Currency
- In a pair the first is the base (EUR in EUR/USD), the second the quote (USD). The price shows how much quote currency 1 base currency is worth.
- Long / Short
- Long is a buy position expecting a rise; short is a sell position expecting a fall.
- Pip
- The smallest standard price move in a currency pair; on most pairs the fourth decimal (0.0001).
Trading & Orders
- MetaTrader (MT4/MT5)
- The most widely used forex/CFD platforms; offer charting, indicators and automated trading (EAs).
- Lot
- The unit of trade size. A standard lot is 100,000 units; mini 10,000, micro 1,000.
- Order Types (Market/Limit/Stop)
- A market order fills at the current price; a limit order at a set better price; a stop order once a set level is crossed.
- Stop-Loss
- An order that auto-closes a position at a set price to cap losses.
- Take-Profit
- An order that auto-closes a position at a target price to lock in profit.
- Slippage
- When an order executes at a different price than expected; common during high volatility.
- ECN / STP / Market Maker
- Execution models: ECN/STP route orders to liquidity providers; a Market Maker is the counterparty. The model matters for spreads and conflict of interest.
- Expert Advisor (EA)
- Automated trading software that runs on MetaTrader (algorithmic/bot trading).
Costs & Leverage
- Spread
- The gap between the bid and ask price of a currency pair; one of a broker’s core trading costs.
- Commission
- A fixed per-trade fee charged in addition to the spread on some account types.
- Swap
- The interest-differential cost or credit of holding a position overnight.
- Leverage
- Opening a larger position with a small margin. It magnifies losses as much as gains; the SPK caps leverage at 1:10 in Türkiye.
- Margin
- The amount reserved in your account to open and maintain a leveraged position.
Regulators & Licenses
- SPK — Capital Markets Board of Türkiye
- Türkiye · The authority regulating and supervising capital markets, including forex, in Türkiye. SPK-licensed firms cap leverage at 1:10; only SPK-authorized intermediaries may legally offer forex in Türkiye.
- FCA — Financial Conduct Authority
- United Kingdom · The United Kingdom’s financial regulator; considered one of the strictest (Tier-1) regulators worldwide.
- ASIC — Australian Securities and Investments Commission
- Australia · Australia’s corporate and markets regulator; a Tier-1 authority known for strong investor protection.
- CYSEC — Cyprus Securities and Exchange Commission
- Cyprus · Cyprus’ securities regulator; operates under the EU (MiFID II) framework and hosts many global brokers.
- BAFIN — Federal Financial Supervisory Authority (BaFin)
- Germany · Germany’s federal financial supervisory authority; a strict Tier-1 regulator.
- CFTC — Commodity Futures Trading Commission
- United States · Regulates U.S. futures and forex markets (alongside the NFA); enforces very strict rules.
- CBI — Central Bank of Ireland
- Ireland · Ireland’s central bank and financial regulator; a Tier-1 authority under the EU framework.
- MFSA — Malta Financial Services Authority
- Malta · Malta’s financial services authority; an EU (MiFID II) regulator.
- KNF — Polish Financial Supervision Authority (KNF)
- Poland · Poland’s financial supervision commission; a regulator under the EU framework.
- FSCA — Financial Sector Conduct Authority
- South Africa · South Africa’s financial conduct authority; a reputable national regulator.
- FSC — Financial Services Commission
- Offshore (Belize, Mauritius, etc.) · The regulator of offshore jurisdictions such as Belize and Mauritius. Offshore licenses do not provide oversight or investor protection as strict as Tier-1.
- FSA — Financial Services Authority
- Seychelles · Seychelles’ financial services authority; provides offshore licenses with lighter oversight than Tier-1.
- VFSC — Vanuatu Financial Services Commission
- Vanuatu · Vanuatu’s financial services commission; a lightly supervised offshore license.
Risk
- Margin Call
- When losses drop your margin below a threshold and the broker asks for more funds or closes the position.
- Drawdown
- The largest peak-to-trough loss an account experiences; a key risk-management metric.
- Volatility
- How much a price fluctuates over a period. High volatility means both opportunity and risk.
- Liquidity
- How quickly an asset can be bought/sold without significantly moving its price. Low liquidity increases slippage.