Starting your forex trading journey can feel overwhelming—especially with all the unfamiliar terminology.
To help you feel more confident, we’ve compiled a list of the 15 most important forex terms every beginner should understand.
Let’s dive in:
1. Currency Pair
Forex is always traded in pairs—like EUR/USD.
- Base currency: The first one (EUR)
- Quote currency: The second one (USD)
2. Pip (Point in Percentage)
The smallest price move a currency pair can make.
For most pairs, 1 pip = 0.0001.
3. Lot
The size of your trade.
- 1 standard lot = 100,000 units
- Mini lot = 10,000
- Micro lot = 1,000
4. Leverage
Allows you to control larger positions with less money.
E.g. 1:100 leverage means you control $10,000 with $100.
⚠️ High leverage = high risk.
5. Spread
The difference between the bid (sell) and ask (buy) price.
This is how brokers often make money.
6. Bid and Ask Price
- Bid: Price you sell at
- Ask: Price you buy at
7. Stop-Loss (SL)
An order that closes your trade when the price goes against you—to limit loss.
8. Take-Profit (TP)
An order that closes your trade automatically when it reaches a certain profit level.
9. Margin
The amount of money required to open a leveraged position.
It’s like a deposit that gives you access to a larger trade.
10. Equity
Your current account balance including open trades.
Equity = Balance ± Unrealized P&L
11. Drawdown
How much your account has dropped from its peak.
It shows your risk exposure over time.
12. Risk-to-Reward Ratio (R:R)
Compares potential loss to potential gain.
E.g. risking 30 pips to gain 90 = 1:3 R:R.
13. Trend
The general direction of the market:
- Uptrend = rising
- Downtrend = falling
- Sideways = flat
14. Support and Resistance
- Support: Price level where buyers usually enter
- Resistance: Price level where sellers usually enter
15. Fundamental and Technical Analysis
- Fundamental: Based on news and economic data
- Technical: Based on charts, trends, and indicators
🎯 Final Thoughts
Learning the language of forex is your first step toward becoming a confident trader.
By mastering these key terms, you’ll be able to read charts, analyze markets, and follow strategies with ease.
Bookmark this post—and refer back as you continue learning.
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