Forex and MetaTrader glossary
85 trading and MetaTrader terms in plain English, from ask price to win rate. Each one links to the tool or guide that goes further.
A
- Ask price
- The price you buy at. It is the higher of the two quoted prices; the gap to the bid is the spread.
- Average True Range (ATR)
- An indicator that measures how far price typically moves per bar. EAs often use it to set stop losses that adapt to volatility.
B
- Backtest
- Running a strategy over historical prices to see how it would have performed. Useful for spotting problems, but past results don't predict future ones. How to backtest an EA
- Balance
- Your account's money from closed trades only. It ignores the profit or loss of positions that are still open.
- Base currency
- The first currency in a pair. In EUR/USD, the euro is the base currency, and one lot is 100,000 euros.
- Bid price
- The price you sell at. It is the lower of the two quoted prices. MetaTrader charts show the bid by default.
- Breakout
- A move out of a price range or past a key level. Breakout strategies enter in the direction of the move.
- Broker server time
- The time zone of your broker's trade server, which MetaTrader uses for candles and EA time filters. It often differs from your local time.
C
- Candlestick
- A chart bar showing the open, high, low and close for one period. Its body spans open to close and its wicks show the high and low.
- Commission
- A fee per trade, usually charged on raw-spread or ECN accounts and quoted per lot. It adds to the cost of every trade alongside the spread.
- Contract size
- The number of units in one lot: 100,000 for currency pairs, usually 100 ounces for gold and 5,000 ounces for silver. You can check it in a symbol's specification in MetaTrader.
- Correlation
- How closely two instruments move together. Running EAs on correlated pairs, such as EUR/USD and GBP/USD, can stack up risk. Risk management for EA trading
- Curve fitting
- Tuning a strategy so closely to past data that it captures noise rather than a real edge. A curve-fitted EA looks excellent in backtests and usually fails live. Also called overfitting. How to evaluate an EA
D
- Data folder
- The folder MetaTrader loads programs from, opened with File > Open Data Folder. Expert advisors go in MQL4/Experts or MQL5/Experts, indicators in the Indicators folder.
- Demo account
- A practice account with virtual money and real prices. The safest place to test an expert advisor before going live.
- Drawdown
- How far an account has fallen from its peak, usually in percent. Recovering needs a larger gain than the loss. Drawdown recovery calculator
E
- ECN account
- An account type that passes orders to liquidity providers with raw spreads and a separate commission. Often preferred for scalping EAs.
- Equity
- Your balance plus or minus the floating profit or loss of open trades. Margin level and stop outs are based on equity.
- Equity stop
- A safety rule that closes all trades when equity falls a set amount below the balance or the peak. Valuable on grid and martingale EAs.
- EX4 and EX5 files
- Compiled MetaTrader programs. .ex4 files run in MT4 and .ex5 files in MT5; neither platform can run the other's files.
- Expectancy
- The average result per trade, often in units of risk (R): win rate × average win minus loss rate × average loss. A strategy needs positive expectancy to make money over time. Risk of ruin calculator
- Expert advisor (EA)
- A program that trades automatically inside MetaTrader 4 or 5 by following fixed rules. Also called a trading robot or forex bot. What is an expert advisor?
F
- Fibonacci retracement
- Levels at 23.6%, 38.2%, 50%, 61.8% and 78.6% of a price swing, watched as possible pullback areas. Fibonacci calculator
- Forward test
- Testing a strategy on data it wasn't optimized on, either a later part of history or live demo trading. A forward test that holds up is stronger evidence than a backtest alone.
- Free margin
- The equity left over after the margin used by open trades. It is what you can use to open new positions.
G
- Gap
- A jump in price between one bar and the next with no trading in between, most common at the weekly open. Gaps can skip past stop losses.
- Grid trading
- Placing trades at fixed price intervals above and below the market. Grids can profit in ranges but build large exposure in strong trends. Grid and martingale EAs
H
- Hedging account
- An account mode that lets you hold buy and sell positions on the same symbol at once. MT4 is always in hedging mode; MT5 supports hedging and netting.
I
- Indicator
- A program that calculates values from price and draws them on a chart, such as moving averages or support levels. Indicators don't trade on their own.
- Inputs
- The settings an expert advisor or indicator exposes in its properties window, such as lot size, stop loss and trading hours.
L
- Leverage
- Borrowed exposure that lets you control a position larger than your margin, shown as a ratio such as 1:100. It magnifies gains and losses alike.
- Limit order
- A pending order to buy below or sell above the current price. Buy limits and sell limits fill only at your price or better.
- Liquidity
- How easily an instrument can be traded without moving its price. Liquidity is highest when major sessions overlap and thinnest at the daily rollover.
- Lot
- The standard trade size unit. One standard lot is 100,000 units of the base currency; a mini lot is 0.10 and a micro lot is 0.01. Position size calculator
M
- Magic number
- An ID an expert advisor stamps on its orders so it only manages its own trades. Give each EA on an account a different magic number.
- Margin
- The part of your equity set aside to keep a leveraged position open, equal to the position's value divided by your leverage. Margin calculator
- Margin call
- A broker's warning that your equity is close to the margin in use. If losses continue, a stop out follows.
- Margin level
- Equity divided by used margin, as a percentage. Brokers use it to decide when to warn you and when to close positions.
- Martingale
- A money management method that increases the lot size after each loss, often doubling it, to recover losses with one win. It can wipe out an account in a long losing run. Grid and martingale EAs
- Maximum drawdown
- The deepest fall from a peak over a test or track record. One of the most important numbers for judging an EA's risk.
- MetaTrader 4 (MT4)
- The long-established trading platform from MetaQuotes, still widely used for forex and expert advisors. MT4 vs MT5
- MetaTrader 5 (MT5)
- The newer MetaQuotes platform, with more timeframes and order types, netting and hedging modes, and a faster multi-threaded strategy tester. MT4 vs MT5
- Modelling quality
- An MT4 strategy tester figure showing how complete the price data behind a backtest was. Low modelling quality means less reliable results.
- MQL4 and MQL5
- The programming languages for MetaTrader 4 and MetaTrader 5. Code written in one has to be ported to run in the other.
N
- Netting account
- An MT5 account mode with one combined position per symbol. A new sell reduces an existing buy instead of opening a separate position.
- News filter
- An EA setting that pauses trading around high-impact economic releases, when spreads widen and price can jump.
- Non-repainting
- Describes an indicator whose past signals never change once their bar has closed. See also repainting. Repainting indicators explained
O
- Optimization
- Running a backtest many times with different input values to find settings that work. Too much optimization leads to curve fitting.
- Out-of-sample data
- Price history kept aside and not used for optimization, so a strategy can be checked on data it hasn't seen.
P
- Pending order
- An order to open a trade later at a set price: buy limit, sell limit, buy stop or sell stop. MT5 adds stop-limit orders.
- Pip
- The standard unit of price movement: 0.0001 for most currency pairs, 0.01 for yen pairs. Most gold traders count 0.10 as a pip. Pip value calculator
- Pivot point
- A level calculated from the previous period's high, low and close, with support and resistance levels around it. Pivot point calculator
- Point
- The smallest price step a broker quotes, usually one tenth of a pip. Many EAs take stop loss and take profit in points.
- Position sizing
- Choosing a trade's lot size so a stop loss costs a set share of the account, such as 1%. Position size calculator
- Profit factor
- Gross profit divided by gross loss. Above 1 a strategy made money; values far above 3 over a short test can be a sign of curve fitting.
- Prop firm
- A proprietary trading firm that funds traders who pass an evaluation with set profit targets and drawdown limits. Prop firm rules for EAs
Q
- Quote currency
- The second currency in a pair. In EUR/USD it is the US dollar: prices and pip values are in dollars.
R
- Recovery factor
- Net profit divided by maximum drawdown. Higher values mean the strategy earned more for the pain it caused.
- Repainting
- When an indicator changes or removes signals on bars that have already closed, so its history looks better than it traded in real time. Repainting indicators explained
- Requote
- A broker's response offering a new price when the requested price is no longer available, most common in fast markets.
- Risk of ruin
- The probability that a strategy hits a drawdown you can't recover from. Risk of ruin calculator
- Risk per trade
- The share of the account a single trade can lose if its stop loss is hit. Commonly 0.5% to 2%.
- Risk to reward ratio
- The distance to the stop loss compared with the distance to the take profit. It decides the win rate a strategy needs to break even. Risk reward calculator
- Rollover
- The daily cut-off, usually 17:00 New York time, when open positions are carried to the next day and swap is charged. Spreads often widen for a few minutes.
S
- Scalping
- A style that takes many short trades for small gains. Highly sensitive to spread, commission and execution speed.
- Session
- The trading hours of a major financial centre: Sydney, Tokyo, London or New York. Forex market hours
- Set file
- A .set file that stores an expert advisor's input values so you can load tested settings in one step.
- Slippage
- The difference between the price you asked for and the price you got. It is common around news and on fast-moving instruments such as gold.
- Spread
- The gap between the ask and the bid, and the main cost of most trades. It widens around news, at rollover and in thin markets.
- Stop loss
- An order that closes a losing trade at a set price to limit the loss.
- Stop out
- When a broker starts closing your positions because the margin level has fallen below its minimum.
- Strategy tester
- MetaTrader's built-in tool for backtesting and optimizing expert advisors, opened with View > Strategy Tester or Ctrl+R. How to backtest an EA
- Swap
- Interest paid or charged for holding a position past the daily rollover. It depends on the interest rates of the two currencies and the direction of the trade.
T
- Take profit
- An order that closes a winning trade at a set price to lock in the gain.
- Tick
- A single price update. Expert advisors react to each new tick.
- Tick data
- History made of every individual price update, the most accurate data for backtesting. MT5 can test on real ticks from your broker.
- Timeframe
- The period each chart bar covers, from one minute (M1) to one month (MN). MT4 has 9 timeframes and MT5 has 21.
- Trailing stop
- A stop loss that moves with price as a trade goes into profit, locking in gains while giving the trade room.
- Trend following
- A strategy style that buys rising markets and sells falling ones, holding while the move lasts.
V
- Virtual private server (VPS)
- A remote computer that runs MetaTrader around the clock, so expert advisors keep trading when your own computer is off. Forex VPS guide
- Volatility
- How much and how fast price moves. Higher volatility means wider stops for the same strategy, and smaller positions for the same risk.
W
- Walk-forward analysis
- Repeatedly optimizing a strategy on one stretch of history and testing it on the next, to check that its settings keep working on new data.
- Win rate
- The share of trades that close in profit. Meaningless on its own: it has to be read together with the average win and average loss.