If you’re new to trading, you’ll encounter many terms that may seem unfamiliar at first. Understanding these terms can help you navigate the markets, use the Fortuno Terminal more effectively, and better understand how your trades and trading account work.
Below are some of the most common trading terms every trader should know.
Currency Pair
A currency pair represents two currencies traded against each other in the forex market.
For example:
- EURUSD
- GBPUSD
- USDJPY
- AUDCAD
Every currency pair consists of a base currency and a quote currency.
Base Currency
The base currency is the first currency shown in a currency pair.
For example, in EURUSD, EUR is the base currency.
Quote Currency
The quote currency is the second currency shown in a currency pair.
In EURUSD, USD is the quote currency.
If EURUSD is trading at 1.1500, this means that one euro is valued at approximately 1.15 US dollars.
Cross Pair
A cross currency pair is a forex pair that does not include the US dollar.
Examples include:
- EURGBP
- EURJPY
- GBPJPY
- AUDCAD
Bid Price
The bid price is the price at which you can sell a trading instrument.
When opening a sell position, your trade is generally executed using the bid price.
Ask Price
The ask price is the price at which you can buy a trading instrument.
When opening a buy position, your trade is generally executed using the ask price.
Spread
The spread is the difference between the bid and ask prices of a trading instrument.
For example:
Bid: 1.1050
Ask: 1.1052
The difference between these two prices is the spread.
At Fortuno Markets, spreads are floating and may change depending on market conditions, liquidity, volatility, economic news, rollover periods, and the instrument being traded.
Pip
A pip is a standard unit used to measure price movements in forex trading.
For most currency pairs, one pip represents a movement in the fourth decimal place.
For example:
1.1050 → 1.1051 = 1 pip
For currency pairs involving the Japanese yen, a pip is usually measured at the second decimal place.
Point
A point is a smaller unit used to measure price movements.
For forex instruments quoted to five decimal places, one pip is generally equal to 10 points.
For example:
1.10500 → 1.10510 = 1 pip or 10 points
The exact price format may vary depending on the instrument.
Pip Value
Pip value represents how much a one-pip movement is worth for a particular trading position.
The pip value depends on factors such as:
- Trading instrument
- Lot size
- Contract size
- Account currency
- Current exchange rate
Understanding pip value can help you calculate the potential profit or loss of a trade.
Nominal Value of 1 Lot
The nominal value of 1 lot represents the total market value of the underlying asset controlled by one lot before leverage is applied.
For example, if one standard lot of EURUSD represents 100,000 euros and EURUSD is trading at 1.1500, the nominal value is approximately:
100,000 × 1.1500 = 115,000 USD
The nominal value of 1 lot may vary depending on the trading instrument, contract size, and current market price.
Nominal value is different from the margin required to open a position. Leverage may reduce the margin required, but it does not reduce the total market exposure represented by the position.
Point Value of 1 Lot
The point value of 1 lot represents the amount gained or lost when the price of an instrument moves by one point for a one-lot position.
The point value depends on factors such as:
- Trading instrument
- Contract size
- Quote currency
- Account currency
- Current exchange rate
- Instrument price precision
For instruments quoted to five decimal places, one point is generally one-tenth of a pip. Therefore, the point value of 1 lot is generally one-tenth of the pip value of 1 lot.
For example, if one pip for a one-lot position is worth $10, one point is generally worth $1.
The exact point value may vary depending on the instrument and current market conditions. You can check the applicable contract specifications on the Fortuno Terminal.
Lot
A lot is a standardized unit used to represent the size of a trading position.
In forex trading, one standard lot generally represents 100,000 units of the base currency.
For example:
1.00 lot = 100,000 units
0.10 lot = 10,000 units
0.01 lot = 1,000 units
Contract sizes may differ for other instruments such as metals, indices, stocks, commodities, and cryptocurrencies.
You can check the contract specifications for each instrument directly on the Fortuno Terminal.
Contract Size
Contract size represents the quantity of an underlying asset represented by one lot.
For forex instruments, one standard lot commonly represents 100,000 units of the base currency.
Other instruments may have different contract sizes.
Always check the instrument specifications before placing a trade.
Leverage
Leverage allows you to control a larger trading position using a smaller amount of margin.
For example, with leverage of 1:500, a position with a notional value of $100,000 requires substantially less capital to be allocated as margin than it would without leverage.
Higher leverage means less margin is required to open a position. However, leverage also increases your exposure relative to the amount of capital in your account.
This means leverage can magnify both potential profits and potential losses.
At Fortuno Markets, available leverage can vary depending on the account type, trading instrument, account equity, and market conditions.
Some instruments use dynamic margin requirements, while others use fixed margin requirements.
Margin
Margin is the amount of funds reserved in your trading account to open and maintain a position.
Margin is not a trading fee. Instead, it is an amount allocated from your account while the position remains open.
For instruments with dynamic margin requirements, margin can generally be calculated as:
Margin = Lots × Contract Size ÷ Leverage
For example, suppose you open 1 lot of EURUSD with a contract size of 100,000 and leverage of 1:500:
Margin = 1 × 100,000 ÷ 500
Margin = 200 EUR
The actual margin requirement may vary depending on the instrument and current trading conditions.
Dynamic Margin Requirements
With dynamic margin requirements, the amount of margin required changes according to the leverage available for the instrument.
In general:
Higher leverage = Lower margin requirement
Lower leverage = Higher margin requirement
At Fortuno Markets, dynamic margin requirements apply to certain instruments, including selected major forex pairs and metals.
Available leverage may change depending on account equity, important economic news, market closures, and other risk-management conditions.
Fixed Margin Requirements
Some trading instruments use fixed margin requirements.
For these instruments, changing the leverage setting on your trading account does not change the margin requirement.
Fixed margin requirements may apply to instruments such as certain:
- Forex pairs
- Cryptocurrencies
- Commodities
- Stocks
- Indices
Always check the instrument specifications on the Fortuno Terminal before opening a position.
Higher Margin Requirements
During periods of increased market risk, Fortuno Markets may temporarily apply higher margin requirements to certain instruments.
These periods may occur around:
- High-impact economic news
- Market closures
- Weekends
- Holidays
- Periods of increased volatility
Higher margin requirements help reduce the risks associated with opening highly leveraged positions during volatile market conditions.
Balance
Your balance represents the amount of money in your trading account after completed transactions have been accounted for.
Your balance can change as a result of:
- Deposits
- Withdrawals
- Realized trading profits
- Realized trading losses
- Other applicable account transactions
Floating profits and losses from positions that are still open are reflected in your equity rather than your balance.
Equity
Equity represents the current value of your trading account after taking your open positions into account.
A simplified formula is:
Equity = Balance + Floating Profit/Loss
For example:
If your account balance is $1,000 and your open positions have a floating profit of $200:
Equity = $1,000 + $200 = $1,200
If your open positions instead have a floating loss of $200:
Equity = $1,000 − $200 = $800
Used Margin
Used margin is the amount of your account equity currently allocated to maintaining your open positions.
As you open additional positions, your used margin may increase.
Free Margin
Free margin represents the amount of equity that is not currently being used as margin for open positions.
A simplified formula is:
Free Margin = Equity − Used Margin
Free margin can generally be used to open additional positions or absorb floating losses from existing positions.
Margin Level
Margin level represents the relationship between your equity and used margin.
It is generally calculated as:
Margin Level = (Equity ÷ Used Margin) × 100%
For example:
If your account has $1,000 in equity and $200 in used margin:
Margin Level = ($1,000 ÷ $200) × 100% = 500%
Your margin level changes as the value of your open positions changes.
Margin Call
A margin call occurs when the margin level of your trading account reaches a specified threshold.
It indicates that your account equity has fallen significantly relative to the margin required to maintain your open positions.
A declining margin level increases the risk that positions may eventually be closed automatically if the stop-out level is reached.
Stop Out
Stop out occurs when your account’s margin level reaches the applicable stop-out threshold.
When this happens, the trading system may automatically begin closing open positions to reduce the account’s exposure.
Margin call and stop-out levels can depend on the applicable Fortuno Markets account conditions. Traders should check the latest account specifications before trading.
Floating Profit and Loss
Floating profit or loss represents the unrealized result of your currently open positions.
For example, if you open a buy position and the market moves in your favor, the position may show a floating profit.
If the market moves against your position, it may show a floating loss.
The result remains unrealized until the position is closed.
Realized Profit and Loss
Realized profit or loss is the final financial result after a trading position has been closed.
Once the position is closed, its realized profit or loss is reflected in your account balance.
Buy Position
A buy position, also known as a long position, is opened when a trader expects the price of an instrument to rise.
If the market price rises after the position is opened, the trade may generate a profit.
If the price falls, the trade may generate a loss.
Sell Position
A sell position, also known as a short position, is opened when a trader expects the price of an instrument to fall.
If the market price falls after the position is opened, the trade may generate a profit.
If the price rises, the trade may generate a loss.
Market Order
A market order is an instruction to buy or sell a trading instrument at the best available market price.
Market orders are normally executed immediately at the available price.
However, during periods of rapid market movement, the actual execution price may differ from the price displayed when the order was submitted.
Pending Order
A pending order is an instruction to open a position when the market reaches a specified price.
Common types of pending orders include:
- Buy Limit
- Sell Limit
- Buy Stop
- Sell Stop
Pending orders can be useful when you want to enter the market at a predetermined price without continuously monitoring the chart.
Buy Limit
A Buy Limit is an order to buy at a price below the current market price.
It is commonly used when a trader expects the price to fall to a certain level before moving higher.
Sell Limit
A Sell Limit is an order to sell at a price above the current market price.
It is commonly used when a trader expects the price to rise to a certain level before moving lower.
Buy Stop
A Buy Stop is an order to buy at a price above the current market price.
It may be used when a trader expects the market to continue rising after reaching a particular price.
Sell Stop
A Sell Stop is an order to sell at a price below the current market price.
It may be used when a trader expects the market to continue falling after reaching a particular price.
Stop Loss
A Stop Loss is an order designed to automatically close a position when the market reaches a specified price.
Traders commonly use Stop Loss orders to manage potential losses.
However, a Stop Loss does not guarantee execution at the exact specified price. During periods of high volatility, low liquidity, or market gaps, the position may be executed at the nearest available price.
Take Profit
A Take Profit is an order designed to automatically close a position when the market reaches a predetermined profit level.
For example, a trader who opens a buy position may place a Take Profit above the opening price.
If the market reaches that level, the position can be closed automatically.
Slippage
Slippage occurs when an order is executed at a price different from the price requested or expected.
Slippage can occur during:
- High market volatility
- Major economic announcements
- Rapid price movements
- Periods of reduced liquidity
- Market gaps
Slippage may be either positive or negative depending on the available market price when the order is executed.
Swap
Swap is an overnight financing adjustment that may apply when a trading position is kept open overnight.
The amount can depend on the instrument, position direction, and applicable trading conditions.
Certain instruments or account conditions at Fortuno Markets may be swap-free.
Check the instrument details on the Fortuno Terminal for the latest applicable swap information.
Trading Instrument
A trading instrument is a financial product that can be bought or sold through a trading platform.
Fortuno Markets provides access to multiple asset classes, including:
- Forex
- Metals
- Indices
- Stocks
- Commodities
- Cryptocurrencies
- ETFs
- Bonds
Each instrument has its own contract specifications, trading hours, margin requirements, and trading conditions.
Trading with Fortuno Markets
Understanding common trading terminology can make it easier to navigate the Fortuno Terminal and understand how your account and positions work.
Before opening a position, always check the relevant instrument specifications, including its contract size, spread, margin requirements, leverage, trading hours, and other applicable trading conditions.
Trading conditions can change depending on the instrument and market environment, so traders should always refer to the latest information available on the Fortuno Markets website and trading platform.
Risk Warning
Trading Futures, Forex, CFDs, and Stocks involves the risk of potential losses. Past performance does not guarantee future results.
Trading leveraged financial instruments carries a high level of risk and may not be suitable for all individuals. Leverage can work both in your favor and against you, and you may lose some or all of your initial investment.
The information provided in this article is for educational and informational purposes only and should not be considered investment advice or a recommendation to trade.