MT4 & forex glossary

Backtesting

Backtesting runs a trading strategy on historical data to estimate how it would have performed. A good backtest is not a promise of future results.

Balance

Balance is your account total not counting open trades. Equity reflects open profit and loss; balance updates only when trades close.

Bid and ask

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

CFD

A CFD (contract for difference) lets you trade the price of an asset without owning it, and go long or short.

Currency pair

A currency pair quotes one currency against another, like EUR/USD. The first currency is the base, the second is the quote.

Drawdown

Drawdown is the peak-to-trough drop in your account equity — a key measure of how much risk a strategy takes.

ECN

An ECN broker routes your orders to a network of liquidity providers, typically with raw spreads plus a commission.

Equity

Equity is your account balance plus or minus the profit or loss of your open trades — what your account is worth right now.

Expert Advisor (EA)

An Expert Advisor is an automated trading program that runs in MetaTrader 4 and places trades for you based on coded rules.

Hedging

Hedging means holding offsetting positions to reduce risk — for example, a buy and a sell on the same instrument at once.

Leverage

Leverage lets you control a larger position with a smaller deposit. It magnifies both gains and losses, which is why regulators cap it for retail traders.

Liquidity

Liquidity is how easily an instrument can be traded without moving its price. High liquidity means tight spreads and easy fills.

Long position

Going long means buying an instrument because you expect its price to rise, so you profit if it goes up.

Lot

A lot is a standardised 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.

Margin

Margin is the deposit your broker sets aside to keep a leveraged position open. It's collateral, not a fee.

Margin call

A margin call is a warning that your account no longer has enough margin to support its open trades — usually because they've moved against you.

Market maker

A market-maker broker takes the other side of your trades and quotes its own prices, rather than routing them to an external market.

MQL4

MQL4 is the programming language used to build Expert Advisors and custom indicators for MetaTrader 4.

Pending order

A pending order tells MT4 to open a trade at a set price in the future, rather than immediately at the current market price.

Pip

A pip is the standard smallest price move in most currency pairs — 0.0001 for most pairs, and 0.01 for pairs involving the Japanese yen.

Scalping

Scalping is a fast trading style that takes many small, very short-term trades to profit from tiny price moves.

Short position

Going short means selling an instrument you expect to fall, aiming to buy it back lower — so you profit if the price drops.

Slippage

Slippage is the difference between the price you expected for an order and the price it actually filled at — common in fast-moving markets.

Spread

The spread is the difference between the bid (sell) and ask (buy) price of an instrument — one of the main costs of trading.

Stop loss

A stop loss is an order that automatically closes a trade at a set price to cap your loss if the market moves against you.

Swap

A swap (or rollover) is the interest you pay or earn for holding a position overnight, based on the interest-rate difference between the two currencies.

Take profit

A take profit is an order that automatically closes a trade at a set target price to lock in a gain.

Trailing stop

A trailing stop is a stop loss that follows the price as a trade moves in your favour, locking in gains while limiting losses.

Volatility

Volatility measures how much and how fast a price moves. Higher volatility means bigger swings — more opportunity and more risk.

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