Glossary

Basic trading and financial markets terms, explained in plain English — built for someone just getting started, not someone who already lives in front of a trading terminal.

Volatility: How much and how fast an asset's price changes. High volatility means large moves in a short time (more risk and more opportunity); low volatility means a relatively stable price.
Spread: The difference between the price you can buy at (ask) and the price you can sell at (bid) for an instrument right now. In practice, it's the implicit cost of entering and exiting a trade.
Leverage: Trading with more capital than you actually have, borrowed from the broker. It multiplies both potential gains and losses — 10:1 leverage means a 1% price move moves your result by 10%.
Pip: The smallest unit of price change in forex, typically the fourth decimal of a currency pair (e.g. from 1.0842 to 1.0843 is 1 pip). Used to measure gains, losses, and spreads.
Stock index: A basket of stocks representing an entire market or sector, rather than a single company. The S&P 500, for example, groups 500 of the largest US companies — it works as a general market thermometer.
Commodity: A basic physical good traded on global markets — gold, oil, coffee, wheat. Its price tends to depend on real supply/demand (weather, production, geopolitics) more than an individual company's sentiment.
Currency pair: Two currencies quoted against each other, like EUR/USD — the price shows how many dollars one euro costs. The first currency is the "base," the second is the "quote."
Market sentiment: The overall mood of market participants — optimistic (bullish) or pessimistic (bearish) — beyond a single data point. It shows up in how prices move together.
Uptrend / downtrend: The general, sustained direction of an asset's price over time: up in an uptrend, down in a downtrend. Different from a single day's move.
Trading volume: The total amount of an asset bought and sold over a given period. A price move with high volume is usually considered more significant than the same move with low volume.
Market capitalization: An asset's total value — price per unit multiplied by the number of units outstanding (a company's shares, or a cryptocurrency's circulating coins, for example).
Liquidity: How easily an asset can be bought or sold quickly without moving its price much. Highly liquid assets (like EUR/USD) have tight spreads; illiquid ones can be hard to sell at the expected price.
Margin: The capital you must deposit as collateral to open a leveraged position. If losses approach that margin, the broker may ask for more funds or close the position automatically.
Long / short position: A "long" position bets the price will rise (buy first, sell later). A "short" position bets it will fall (sell first, buy back later, typically by borrowing the asset).
Stop loss: An automatic order to close a position if the price moves against you past a certain level — a basic risk management tool to cap losses.
Take profit: An automatic order to close a position and lock in gains once the price reaches a certain level in your favor, without needing to watch the market live.
Blue chip: A large, established, financially solid company's stock with a long track record — considered (though not guaranteed) to be relatively more stable within equities.
Market correction: A price drop of roughly 10% or more from a recent high, in an index or asset — distinct from a "bear market," which usually refers to larger, more prolonged declines.
Bull / bear market: A prolonged period (months or years, not days) of a general uptrend ("bull") or downtrend ("bear") across an entire market, not just a single instrument.
Base / quote currency: In a currency pair like USD/MXN, the "base" (USD) is the currency being measured; the "quote" (MXN) is the one the price is expressed in — the number shows how many pesos one dollar costs.

ExchangeWeather — exchangeweather.com