Trading glossary
One-sentence definitions of the terms used on this site.
- balance
- The account value from closed trades only, not counting open positions.
- CFD
- Contract for difference: a leveraged contract that pays the price change of an asset without owning the asset.
- consistency rule
- A prop firm rule that limits how much of your total profit may come from a single day.
- daily loss limit
- The most a prop firm account may lose in one trading day, measured from a reference level at the start of the day.
- drawdown
- How far an account falls from a reference level. Prop firms close accounts that exceed their drawdown limits.
- equity
- The balance plus or minus the floating profit or loss of open positions.
- expert advisor (EA)
- An automated trading program that runs inside MetaTrader.
- funded account
- The account a prop firm gives you after you pass its evaluation; it is often simulated, with payouts paid by the firm.
- leverage
- Borrowed exposure — 1:100 means $1 of margin controls $100 of position, multiplying gains and losses.
- lot
- The unit of trade size: a standard lot is 100,000 units of the base currency, 0.1 a mini lot and 0.01 a micro lot.
- margin
- The money a broker sets aside from your account to open and keep a leveraged position.
- margin call
- A warning that your equity has fallen close to the margin needed to keep your positions open.
- pip
- The standard price step of a currency pair — 0.0001 for most pairs, 0.01 for JPY pairs.
- profit split
- The share of profits a funded trader keeps; the prop firm keeps the rest.
- profit target
- The profit a prop firm challenge requires before you move to the next phase or get a funded account.
- slippage
- The difference between the price you asked for and the price at which your order was filled.
- spread
- The difference between the buy and sell price — the main trading cost on most accounts.
- stop loss
- An order that closes a position at a set price to limit the loss.
- stop out
- The level at which the broker starts closing your positions automatically because equity no longer covers the margin.
- swap
- Overnight financing credited or charged when a leveraged position stays open past the daily rollover.
- swap-free account
- An account without overnight swaps, often called an Islamic account; the broker may charge other fees instead.
- take profit
- An order that closes a position at a set price to lock in the profit.
- trailing drawdown
- A maximum-loss floor that rises with the highest balance or equity reached; a static limit stays fixed.