This trading glossary collects the terms used across DravoTrader, written so that each one makes sense on its own. Where a term matters for safety, the definition says so. Jump to a letter below.
Sales pages often use these words loosely, and sometimes deliberately vaguely. When a firm's terms or a stranger's pitch uses one you are unsure of, look it up before agreeing to anything: a misunderstood word such as margin, swap or recovery phrase can be expensive.
- Address poisoning
- A crypto trick in which a scammer sends a tiny or zero-value transfer from an address that closely resembles one you use, so that it appears in your transaction history. The hope is that you will later copy the fake address by mistake. Always copy addresses from the original source and check every character. See how crypto works.
- Ask
- The price at which a broker or market will sell to you, and therefore the price you pay when you buy. It is always higher than the bid, and the gap between them is the spread. On a quote shown as 1.2699 / 1.2701, the ask is the second figure.
- Base currency
- The first currency in a pair. In EUR/USD the euro is the base, and the quote tells you how many US dollars one euro costs. Buying the pair means buying the base currency; selling it means selling the base currency. Lot sizes are measured in units of the base currency.
- Bid
- The price at which a broker or market will buy from you, and therefore the price you receive when you sell. It is always lower than the ask. A long position is valued at the bid, which is why a new trade shows a small loss equal to the spread straight away.
- Blockchain
- A shared ledger of transactions grouped into blocks, each linked to the previous one by a cryptographic fingerprint and kept in step by many independent computers. Because every copy must agree, past entries are very hard to alter. Bitcoin and Ethereum each run their own blockchain.
- Broker
- A firm that gives you access to markets, places your orders and usually holds your cash and investments. Brokers serving the public normally need authorisation from a national regulator, and the entity you contract with determines which protections apply. See how to choose a broker.
- CFD
- Contract for difference: an agreement with a provider to exchange the change in an asset's price between opening and closing, without owning the asset itself. CFDs are usually leveraged, carry overnight financing charges and are the product on which most retail trading losses occur.
- Clone firm
- A fraudulent operation that copies the name, address and registration number of a genuine authorised company, while using its own website, phone numbers and email. Victims who check only the name on a register are misled. Compare every contact detail with the regulator's own entry for the firm.
- Commission
- A fee charged for executing a trade, separate from the spread. It may be a fixed amount per trade, a set amount per lot on each side, or a percentage of the trade's value. Small trades with fixed commissions are expensive in proportion to their size.
- Confirmation
- In crypto, each new block added to the chain after the block containing your transaction. The more confirmations a transaction has, the less practical it is to reverse, which is why exchanges wait for a set number before crediting a deposit to your account.
- Cross pair
- A currency pair that does not include the US dollar, such as EUR/GBP, EUR/JPY or GBP/JPY. Spreads on crosses are often a little wider than on major pairs, and calculating pip value in dollars requires an extra conversion rate, which our pip calculator asks for.
- Dividend
- A payment a company makes to shareholders out of its profits, usually in cash and often quarterly or twice a year. Dividends are decided by the company's board, are never guaranteed and can be reduced or stopped when business is difficult. Dividend yield expresses them as a percentage of the share price.
- Equity
- In a trading account, your balance plus or minus the unrealised profit or loss on open positions: what the account would be worth if everything were closed now. In company terms, equity is another word for shares or for the value belonging to shareholders.
- Exchange
- A marketplace where buyers and sellers are matched. Stock exchanges are regulated and run under published rulebooks and trading hours. Crypto exchanges are companies that match orders, hold customers' coins and set their own rules, and the oversight they face varies greatly from country to country.
- Gap
- A jump in price between one trade and the next with no trading in between, most often when a market reopens after a weekend or after news. A stop-loss caught in a gap is filled at the first available price, which can be well beyond the level you set.
- Halving
- The scheduled cut in Bitcoin's block reward, which happens every 210,000 blocks, roughly every four years. Halvings took place in 2012, 2016, 2020 and April 2024, when the reward fell to 3.125 BTC. The next is expected around 2028. See what is Bitcoin.
- Index
- A single number that tracks the combined value of a basket of shares, such as the S&P 500, FTSE 100 or Nikkei 225. Indices differ in how many companies they include and how they are weighted, by market value or by share price, which affects how they move.
- Leverage
- Market exposure larger than the money you put down, shown as a ratio such as 30:1. It magnifies gains and losses alike, because profit and loss are calculated on the whole position. Regulators in many countries cap retail leverage. See the margin calculator.
- Limit order
- An instruction to buy or sell only at a chosen price or better: no higher when buying, no lower when selling. It gives you control over the price, but if the market never reaches your level, the order is not filled.
- Lot
- The standard unit of trade size in forex. A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. For gold, a lot is commonly 100 troy ounces. Brokers may use slightly different contract sizes, so check the specification.
- Margin
- The part of your balance a broker sets aside as security while a leveraged position is open, calculated as position value divided by leverage. It is not a fee, but it is at risk: losses on the position are taken from your equity, and the margin can be lost entirely.
- Margin call
- A warning, or an automatic action, when your equity falls too low relative to the margin used. Under UK and EU rules for retail CFD clients, positions are closed when the margin level reaches 50%. Offshore firms may set different levels or none at all.
- Market order
- An instruction to buy or sell straight away at the best available price. It is filled quickly but gives no control over the exact price, which may differ from the one on screen when prices are moving fast or trading is thin.
- MetaTrader
- Widely used trading software, in versions MT4 and MT5, made by MetaQuotes and licensed to brokers, who connect it to their own servers. The software being genuine says nothing about the broker running the server behind it. See MetaTrader explained.
- Negative balance protection
- A rule for retail CFD clients in the UK, EU and some other places that prevents total losses from exceeding the money in the account. Without it, a sudden price gap could leave a trader owing the broker money. Check whether it applies to the entity you deal with.
- Pip
- The standard unit of price movement in forex: 0.0001 for most pairs and 0.01 for pairs involving the Japanese yen. On one standard lot of a pair quoted in US dollars, one pip is worth $10. See the pip calculator.
- Private key
- The secret number that controls a crypto address and signs its transactions. Whoever holds the private key can move the coins, with no bank or support desk able to overrule them. Wallets store keys for you and can regenerate them from a recovery phrase.
- Quote currency
- The second currency in a pair, in which the price is expressed. In GBP/USD the quote currency is the US dollar, so a price of 1.2700 means one pound costs 1.27 dollars. Profit and loss on a pair is first calculated in the quote currency.
- Recovery phrase
- A list of usually 12 or 24 words from which a crypto wallet's private keys can be restored. It is the master key to the wallet. Never share it, photograph it or type it into a website; no genuine exchange, wallet maker or support agent will ever ask for it.
- Recovery scam
- A follow-up fraud aimed at people who have already lost money. Someone posing as a lawyer, investigator, regulator or crypto tracing service offers to retrieve the lost funds in exchange for an upfront fee, then disappears. See how to spot trading scams.
- Regulator
- The public body that authorises and supervises financial firms in a country or region, such as the UK Financial Conduct Authority or the Australian Securities and Investments Commission. Most regulators keep a public register of authorised firms and a list of warnings about unauthorised ones.
- Rollover
- The daily cut-off, 17:00 New York time in forex, at which open leveraged positions are carried over to the next day and the overnight financing charge or credit is applied. Spreads often widen for a short time around the rollover.
- Segregated account
- A bank account in which a regulated firm holds client money separately from its own funds. If the firm fails, segregated money is not supposed to be used to pay the firm's own creditors, though recovering it can take time.
- Settlement
- The formal exchange of cash and assets after a trade is agreed. US shares settle one business day after the trade date, known as T+1. Standard forex deals settle two business days later, which is why forex financing is usually tripled on Wednesdays.
- Slippage
- The difference between the price you expected and the price at which an order is actually filled. It is most common in fast markets, around news and when trading is thin, and it can work against you or, occasionally, in your favour.
- Spread
- The difference between the bid and the ask price. It is a cost paid on every trade, because you buy at the higher price and sell at the lower one. Spreads widen when markets are quiet or volatile. See trading fees explained.
- Stablecoin
- A crypto token designed to keep a steady value against a currency, usually the US dollar, typically backed by reserves held by its issuer. Its stability depends on those reserves and on redemptions being honoured. See what is USDT.
- Stop-loss
- An order that closes a position automatically once the price reaches a level you set, to limit a loss. When triggered it becomes a market order, so in a fast move or a gap it can be filled at a worse price than the one chosen.
- Swap
- The overnight financing charge or credit on a leveraged position held past the daily cut-off. In forex it reflects the interest rate difference between the two currencies plus the provider's mark-up, and it is usually tripled on Wednesday nights to cover the weekend.
- Volatility
- How much and how quickly a price moves over a period. Higher volatility means bigger swings in both directions, wider spreads at times and a greater chance that stops are hit or skipped. Crypto-assets are generally far more volatile than major currency pairs.