Glossary Of Trading Terms
Over 30 essential trading terms explained in simple, beginner-friendly language. No jargon, just clear definitions.
This glossary defines the most common terms you will encounter as a new trader. Each term is explained in plain English without unnecessary jargon. Bookmark this page and refer back to it whenever you come across a word you do not recognize.
Ask Price
The price you pay when you buy a currency pair. It is always slightly higher than the bid price. The difference is the spread.
Balance
The total amount of money in your trading account, not counting any open trades. It only changes when you close a trade.
Bid Price
The price you receive when you sell a currency pair. It is always slightly lower than the ask price.
Broker
A company that gives you access to the forex market so you can place trades. Albatrix Funded uses brokers to provide trading platforms.
Challenge
An evaluation that tests your trading ability. Pass the challenge and you receive a funded account with real buying power.
Consistency Rule
A rule on funded accounts that says no single day's profit can be more than 15% of your total profit. It encourages steady, consistent trading.
Currency Pair
Two currencies traded together, like EUR/USD. The first is the base currency, the second is the quote currency.
Daily Drawdown
The maximum you can lose in a single trading day. At Albatrix Funded, it is 3% of the previous day's closing equity. Breach it and you fail.
Drawdown
A decline in your account balance or equity from its highest point. Drawdown limits protect the firm from large losses.
Equity
Your account balance plus or minus the floating profit or loss from all your open trades. It changes constantly while trades are open.
Evaluation
Another word for the challenge process. You go through an evaluation to prove you can trade before getting funded.
Forex
Short for foreign exchange. It is the global market where currencies are bought and sold. It is the largest financial market in the world.
Funded Account
A real trading account with the firm's capital that you receive after passing the challenge. You trade this account and split the profits.
Leverage
Borrowed money that lets you control a large position with a small deposit. For example, 1:100 leverage means $1,000 controls $100,000.
Long
Buying a currency pair expecting its price to go up. If you go long on EUR/USD, you think the euro will get stronger than the dollar.
Lot
A standardized unit of trade size. A standard lot is 100,000 units, a mini lot is 10,000, and a micro lot is 1,000 units.
Margin
The amount of money you need to have in your account to open a leveraged trade. It is a deposit, not a fee or cost.
Max Drawdown
The total loss limit for your account. At Albatrix Funded, it is 7% of the starting balance. Your equity can never fall below this level.
Pip
The smallest price movement in most currency pairs, usually 0.0001. Traders measure profit and loss in pips.
Position Size
The amount of currency units (lots) you trade. Position size determines how much each pip movement is worth.
Profit Split
The percentage of profits you keep versus what the firm keeps. For example, 80/20 means you keep 80%.
Profit Target
The amount of profit you need to make to pass a challenge phase. At Albatrix Funded, it is 6% of the account size.
Risk Management
The practice of controlling how much you can lose on each trade. The most common rule is to risk no more than 1% per trade.
Risk to Reward Ratio
A comparison of how much you risk versus how much you expect to make. A 1:2 ratio means risking $1 to make $2.
Short
Selling a currency pair expecting its price to go down. If you short EUR/USD, you think the euro will weaken against the dollar.
Spread
The difference between the bid and ask price. It is measured in pips and is how brokers make money when you open a trade.
Stop Loss (SL)
An order that automatically closes your trade at a set price to prevent further loss. You should use one on every trade.
Take Profit (TP)
An order that automatically closes your trade when it reaches a set profit level. It locks in your gains without you needing to watch the screen.
Time Limit
Many prop firms require you to pass within a certain number of days. Albatrix Funded has no time limit on any phase.
Trailing Drawdown
A drawdown limit that moves up as your account grows. The daily drawdown is calculated from the previous day's closing equity, not the original balance.
Volatility
How much and how quickly a currency pair's price moves. High volatility means large, fast price swings. Low volatility means small, slow movements.
How To Use This Glossary
As you read through the other articles in this section, whenever you see a term you do not understand, come back here. Each definition is written assuming zero prior knowledge. Over time, these terms will become second nature.