Commonly Used Trading Jargon
Module 1: Introduction to Trading & Financial Markets
Every world has its own language
Walk into a hospital and you will hear doctors and nurses speaking in a language that sounds like English but is filled with terms most people have never encountered. Walk onto a construction site and the same thing happens. Walk into a trading floor, physical or digital, and you will find exactly the same thing.
Trading has its own vocabulary. And unlike medical or engineering jargon which exists out of necessity, trading jargon exists partly because the concepts genuinely need precise names and partly because it can make an accessible activity sound more intimidating than it needs to be.
This chapter is your decoder ring. By the end of it, nothing you read on a trading platform, a financial news site, or a market commentary will leave you reaching for a search engine.
The essential terms every trader uses daily
Core trading terms and their meanings
| Term | Definition | Example in practice |
|---|---|---|
| Pip | Smallest standard price movement in forex | EUR/USD moves from 1.1000 to 1.1001, that is 1 pip |
| Lot | Standard unit of trade size | Standard lot is 100,000 units, micro lot is 1,000 units |
| Long | An open buy trade | I am long EUR/USD means you have a buy position open |
| Short | An open sell trade | I am short gold means you have a sell position open |
| Bull | Expecting prices to rise | A bullish trader believes the market will go higher |
| Bear | Expecting prices to fall | A bearish trader believes the market will go lower |
| Stop loss | Auto close order when price moves against you | Set 30 pips away to cap your maximum loss |
| Take profit | Auto close order when price moves in your favour | Set 60 pips away to lock in your target gain |
| Spread | Gap between bid and ask price | The cost of opening every trade you make |
| Slippage | Fill price differs from expected price | Common during major news releases |
| Liquidity | How easily an asset can be bought or sold | EUR/USD is extremely liquid, exotic pairs are not |
| Volatility | How much and how fast a price moves | High volatility means bigger moves and bigger risk |
| Position | An open trade | You have a long position in EUR/USD |
| Equity | Account value including open trade profit or loss | Balance plus unrealised gains or losses |
| Balance | Cash in account excluding open trade results | Only changes when you close a trade or deposit |
| Drawdown | Reduction from account peak to lowest point | Account grew to $2,000 then fell to $1,600, that is 20% drawdown |
Understanding pip value and lot sizes
The pip is the building block of all forex profit and loss calculations. Understanding exactly how much each pip is worth based on your lot size is essential before placing any trade.
Pip value by lot size on EUR/USD
| Lot type | Units | Pip value in USD | Example: 50 pip win |
|---|---|---|---|
| Standard lot | 100,000 | $10 per pip | $500 profit |
| Mini lot | 10,000 | $1 per pip | $50 profit |
| Micro lot | 1,000 | $0.10 per pip | $5 profit |
On Navion Pro you can trade in fractional lot sizes, giving you precise control over your position size and therefore precise control over exactly how much you risk on each trade.
Terms you will see in market commentary
- Central bank signals rate rises
- Currency typically strengthens
- Watch for in Fed and ECB statements
- Central bank signals rate cuts
- Currency typically weakens
- Opposite of hawkish stance
- Traders are confident, buying risk
- Stocks rise, safe havens fall
- EUR, AUD, stocks perform well
- Uncertainty, moving to safety
- Gold, JPY, CHF strengthen
- Stocks and high yield currencies fall
Support is a price level where buying interest has historically been strong enough to prevent the price from falling further. Resistance is a price level where selling pressure has historically been strong enough to prevent the price from rising further. We cover these in depth in Module 2.
A breakout occurs when a price moves decisively beyond a support or resistance level it had previously been unable to cross. Breakouts often lead to accelerated price movements and are among the most widely traded setups in technical analysis.
Account terms you need to master
Drawdown is one of the most important concepts in trading psychology and risk management. If your account grew to $2,000 and then fell back to $1,600, you experienced a 20% drawdown. Every trader has drawdown periods. What separates professionals from amateurs is how they respond. Professionals reduce position size during drawdown. Amateurs increase it trying to recover quickly, which usually makes things worse.
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Chapter Quiz
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