Glossary

All-in cost

What one round-turn trade of a standard lot actually costs: the spread converted to money plus any commission. On EUR/USD, 1 pip on a standard lot is $10, so a 0.1-pip spread plus $7 commission is $8 all-in. See Spreads and commissions.

Ask and bid

The ask is the price you buy at; the bid is the price you sell at. The gap between them is the spread.

CFD

Contract for difference: an agreement to exchange the difference in an asset's price between opening and closing a trade, without owning the asset. Most retail forex trading in the EU and UK is done through CFDs.

CPA

Cost per acquisition: a one-off fee a broker pays an affiliate when a referred client opens and funds an account. See How we are paid.

ECN / STP

Execution models where the broker passes your order to liquidity providers rather than taking the other side itself. Usually raw spreads plus a commission.

ESMA

The European Securities and Markets Authority, which set the EU's retail leverage limits and negative balance protection rules for CFDs.

Leverage

Borrowed exposure: 30:1 leverage lets $1,000 of margin control a $30,000 position. Gains and losses are calculated on the full position. See Leverage and margin.

Lot

The standard unit of trade size. A standard lot is 100,000 units of the base currency; a mini lot is 10,000; a micro lot is 1,000. See Lot sizes.

Margin

The deposit your broker holds to keep a leveraged position open. If losses eat into it, you get a margin call and positions may be closed automatically.

Margin close-out

The level at which the broker automatically closes positions. For EU and UK retail clients it is 50% of the required margin.

Market maker

A broker that takes the other side of clients' trades itself. Not necessarily bad, but it creates a conflict of interest that good regulation manages.

Negative balance protection

A rule that you cannot lose more than the money in your account. Mandatory for retail clients in the EU and UK.

Pip

The smallest standard price move in a currency pair: 0.0001 for most pairs, 0.01 for yen pairs. See What is a pip.

Revenue share

An affiliate model where the broker pays a percentage of the revenue it earns from a referred client.

Retail investor accounts lose money

The percentage each EU or UK CFD provider must publish, showing how many of its retail accounts lost money over the past 12 months. We show it next to every "Open account" button.

Segregated funds

Client money kept in separate bank accounts from the broker's own money, so it cannot be used to pay the broker's creditors.

Slippage

The difference between the price you asked for and the price you got. It happens in fast markets and can go either way.

Spread

The difference between the ask and the bid. The main cost of trading on many accounts.

Stop-loss

An order that closes a trade automatically at a level you set in advance, to limit a loss. In a fast or gapping market it can fill at a worse price.

Swap (rollover)

Interest charged or paid for holding a position overnight, based on the interest rate difference between the two currencies. "Swap-free" accounts replace it with a fixed fee.

Missing a term? Email [email protected].