The Institutional Trading Lexicon

The specific price at which a market participant can purchase an asset or currency pair. In any given quote, the Ask price is always higher than the Bid price.

If EUR/USD is quoted at 1.0850/1.0852, the Ask price is 1.0852.

The total amount of settled cash in a trading account. It does not include unrealized profits or losses from currently open positions.

The specific price at which a market participant can sell an asset or currency pair. The Bid price represents the highest price buyers are currently willing to pay.

In a quote of 1.0850/1.0852, the Bid price is 1.0850.

A visual charting method that displays the Open, High, Low, and Close (OHLC) prices of an asset for a specific time interval.

An agreement between a trader and a broker to exchange the price difference of an underlying asset between the opening and closing of the contract.

A distribution of a portion of a company's earnings to its shareholders, usually issued as cash payments or additional stock.

The peak-to-trough decline in a trading account's equity or a strategy's performance over a specific period, measured from the highest point to the subsequent low.

An account dropping from $10,000 to $8,000 has experienced a 20% drawdown.

The real-time total value of a trading account, calculated as the cash balance adjusted for the unrealized profit or loss of all open positions.

Balance of $10,000 + Unrealized Profit of $500 = $10,500 Equity.

The total time (latency) between the moment an order is transmitted and the moment it is filled by the exchange or liquidity provider.

The portion of account equity that is not currently being used as collateral for open positions. It is available to open new trades or absorb losses.

The use of borrowed capital to increase a participant's market exposure beyond their actual account equity. It allows for the control of larger positions with a smaller deposit.

With 100:1 leverage, a $1,000 deposit can control a $100,000 position.

A pending instruction to buy or sell an asset at a specific price or better. A buy limit is placed below market price; a sell limit above.

The extent to which an asset can be quickly bought or sold in the market without significantly affecting its price stability.

The standardized unit of trade size in the financial markets. In Forex, a standard lot represents 100,000 units of the base currency.

Buying 1 standard lot of EUR/USD means you are controlling 100,000 Euros.

The collateral required to open or maintain a leveraged position. It is not a fee, but a portion of account equity "locked" by the broker as security.

A 1% margin requirement on a $100,000 position requires $1,000 of locked equity.

An automated alert or action initiated by a broker when a trading account's equity falls below the required maintenance margin level.

An instruction to execute a trade immediately at the best available current price in the market.

Short for "Percentage in Point," it is the standard unit of measurement for price movement in Forex. For most pairs, it is the fourth decimal place (0.0001).

If EUR/USD moves from 1.1000 to 1.1001, it has moved 1 pip.

A mathematical comparison between the potential loss (risk) and the potential gain (reward) of a planned trade.

The difference between the expected price of a trade and the actual price at which the trade is executed by the liquidity provider.

The numerical difference between the Bid and Ask prices of an asset. It serves as a primary measure of market liquidity and transaction cost.

If the Bid is 1.2500 and the Ask is 1.2501, the spread is 1 pip.

A critical risk management order designed to automatically close a position at a predetermined price level to limit potential downside exposure.

An order that becomes a Market Order once a specific price level (the "stop price") is reached. A buy stop is placed above market price; a sell stop below.

The interest rate differential paid or earned for holding a position overnight. It represents the cost of carrying a position to the next trading day.

An automated standing order used to close a profitable position once the asset reaches a specific target price level.

A statistical measure of the dispersion of returns for a given security or market. It represents the frequency and magnitude of price fluctuations.