Forex and CFD glossary: 60 terms explained

What are the core price and trade-size terms?

**Pip (percentage in point)** — the smallest standardised price move in a currency pair. For most pairs quoted to four decimal places (e.g. EUR/USD at 1.0850), one pip is a move of 0.0001. For pairs involving the Japanese yen (quoted to two decimal places), one pip is 0.01. A pip is the unit you use to measure profits, losses and spreads. According to the Bank for International Settlements, the foreign-exchange market turns over more than USD 7.5 trillion per day — pip movements in major pairs are therefore extremely small in absolute terms but large in leverage-amplified accounts.

**Lot** — the standard unit of trade size. One standard lot equals 100,000 units of the base currency. A mini lot is 10,000 units; a micro lot is 1,000 units; a nano lot is 100 units. Retail traders in the Caucasus and Central Asia typically trade micro or mini lots to keep position sizes manageable relative to their account balance. The lot size determines how much one pip movement is worth in monetary terms.

• Pip: the smallest standardised price move — 0.0001 for most pairs, 0.01 for JPY pairs.
• Lot: trade-size unit — standard (100,000 units), mini (10,000), micro (1,000), nano (100).
• Tick: the smallest possible price increment on a given platform — may differ from a pip.
• Point: sometimes used interchangeably with pip; can also refer to the fifth decimal place (a 'pipette').
• Pipette (fractional pip): one-tenth of a pip; shown in the fifth decimal place on most platforms.

What is leverage, and how does margin work?

**Leverage** — the mechanism that lets a small deposit control a position many times larger. If a broker offers 30:1 leverage, a deposit of a given amount controls a position thirty times that size. Gains and losses are calculated on the full position, not just the deposit. The Financial Conduct Authority (FCA) caps retail leverage at 30:1 for major forex pairs under its jurisdiction; lighter offshore regulators (Seychelles FSA, Belize FSC) often allow 100:1, 200:1 or more — which amplifies losses just as much as gains. Leverage is the core risk driver in retail forex.

**Margin** — the deposit held by the broker as collateral while a leveraged position is open. It is not a fee; it is a portion of your account balance reserved to cover potential losses. If losses reduce your account to the margin threshold, you receive a margin call. If losses fall further, the broker may close your position (margin close-out). Strict-tier regulators (FCA, ASIC, CySEC) require negative-balance protection so that a retail client cannot lose more than their account balance on a single close-out.

• Leverage: multiplies both gains and losses — a double-edged mechanism, not a benefit in isolation.
• Margin: the collateral deposit held by the broker while a position is open.
• Margin call: a broker warning that your account equity is approaching the minimum required margin.
• Margin close-out (stop-out): automatic position closure when equity falls to or below the broker's minimum margin level.
• Negative-balance protection: a strict-tier requirement preventing retail clients from losing more than their account balance.
• Free margin: account equity minus the margin currently in use — what remains available to open new trades.

What is a spread, and what are the main types of order?

**Spread** — the difference between the buy (ask) price and the sell (bid) price at which a broker quotes a pair. It is the primary transaction cost on most retail forex accounts. A broker quoting EUR/USD at 1.08503/1.08509 has a 0.6 pip spread. Tighter spreads reduce your cost per trade; wider spreads increase it. CaspianFX does not publish editorial spread figures because they change constantly and vary by account type — check the broker's live rates page.

**Stop-loss order** — an instruction to close a trade automatically if the price moves against you to a specified level. It is the primary risk-management tool available to retail traders and limits the loss on a single trade to a pre-defined amount. A stop-loss does not guarantee exact execution at the specified level in fast or gapping markets (this is called slippage), but it prevents the scenario where an unattended position runs to a margin close-out. Using a stop-loss on every trade is the single most important habit for limiting downside.

• Spread: bid/ask difference — the primary transaction cost on most retail accounts.
• Market order: an instruction to buy or sell immediately at the current market price.
• Limit order: an instruction to buy or sell at a specific price or better — waits until the market reaches that level.
• Stop-loss order: closes a position automatically if price moves against you to a defined level.
• Take-profit order: closes a position automatically when price reaches a defined profit target.
• Slippage: the difference between the expected and actual execution price — common in fast or thin markets.
• Pending order: a conditional order (buy/sell stop or limit) placed in advance at a specific price level.

What is a swap or rollover, and what is a swap-free account?

**Swap (overnight rollover or financing charge)** — the interest adjustment applied to a position held open overnight. Forex positions involve borrowing one currency to buy another; the interest rate differential between the two currencies determines whether you receive a credit or pay a debit on open positions at the daily rollover time (typically 5pm New York time). Swaps accumulate on positions held for multiple days and can meaningfully erode or enhance a position over weeks or months.

**Swap-free account** — an account type on which the overnight swap charge is removed. This is a product feature offered by many major brokers, distinct from any religious or cultural framing. Some traders prefer swap-free accounts purely to simplify their cost calculation on longer-held positions. Note that some brokers impose an alternative 'administration fee' or widen spreads on swap-free accounts to recoup the cost — check the broker's specific terms. CaspianFX reports whether a broker offers a swap-free account type (a verifiable fact); we do not pronounce on any religious classification.

• Swap (rollover): daily interest adjustment on positions held overnight — credit or debit depending on rate differentials.
• Swap-free account: an account type with no overnight swap charge — a neutral product feature.
• Triple swap Wednesday: brokers typically charge three days of swap on Wednesday to cover the weekend.
• Rollover time: usually 5pm New York time — when swap is applied for positions held at that moment.
• Administration fee: an alternative charge some brokers apply on swap-free accounts in place of the overnight swap.

What is a CFD and how does it differ from trading the underlying asset?

**CFD (contract for difference)** — a derivative contract between a trader and a broker to exchange the price difference of an asset (currency pair, stock index, commodity, share) between entry and exit. You do not own the underlying asset; you take a position on the price direction. CFDs can be long (profit if price rises) or short (profit if price falls). Because they are leveraged derivatives, losses can exceed the deposit if negative-balance protection does not apply. CFDs on forex pairs and indices are the predominant instruments offered by the offshore-regulated brokers serving the Caucasus and Central Asia.

**Currency pair** — the quotation structure for forex: the base currency is bought or sold against the quote currency. EUR/USD means one euro expressed in US dollars. Major pairs involve the US dollar against another major currency (EUR, GBP, JPY, CHF, AUD, CAD, NZD). Minor pairs cross two major currencies without USD (e.g. EUR/GBP). Exotic pairs involve a major currency and an emerging-market currency — regional examples include USD/GEL (Georgian lari), USD/KZT (Kazakhstani tenge) and USD/AZN (Azerbaijani manat), though the lari, tenge and manat are primarily traded in local interbank markets rather than through retail CFD brokers.

• CFD: a derivative contract on the price difference — no ownership of the underlying asset.
• Long position: a buy trade — profits if the price rises.
• Short position: a sell trade — profits if the price falls.
• Going long/going short: the direction of the trade.
• Currency pair: base/quote structure — e.g. EUR/USD, GBP/JPY.
• Major pair: involves USD and another major currency.
• Minor pair (cross): two major currencies, no USD — e.g. EUR/GBP.
• Exotic pair: major currency + emerging-market currency — e.g. USD/KZT.

What do key account and platform terms mean?

**MT4 / MT5 (MetaTrader 4 and MetaTrader 5)** — the two most widely used retail forex trading platforms, developed by MetaQuotes. MT4 was launched in 2005 and remains the dominant platform for retail forex; MT5, launched in 2010, adds more timeframes, order types and asset classes including stocks and futures. Most brokers in our coverage set (Exness, XM, FBS, IC Markets, Pepperstone, FP Markets) offer both. cTrader is an alternative platform favoured for raw-spread ECN-style trading; TradingView is used by some brokers as a charting and execution interface.

**Demo account** — a practice account funded with virtual money that lets you trade at real-time market prices without risking capital. Every major broker in our coverage set offers demo accounts on MT4, MT5 or their proprietary apps. Using a demo account before funding a live account is the most practical way to learn platform mechanics, test your understanding of leverage and margin, and confirm the broker's execution in your region before any real money is at stake.

• MT4 (MetaTrader 4): the dominant retail forex platform, launched 2005 by MetaQuotes.
• MT5 (MetaTrader 5): expanded platform (more timeframes, stocks, futures), launched 2010.
• cTrader: ECN-style alternative platform, popular with raw-spread brokers.
• TradingView: charting and execution interface offered by some brokers as an alternative.
• Demo account: practice account with virtual money — real-time prices, no capital at risk.
• Live account: a funded account where real money is at stake.
• ECN (Electronic Communication Network): order routing that connects your order directly to liquidity providers.
• STP (Straight Through Processing): automatic order routing without a dealing desk intermediary.
• Market maker: a broker that acts as counterparty to your trades internally rather than routing to external liquidity.

What are the key regulatory and compliance terms?

**Offshore regulator** — a financial-services authority based in a jurisdiction that offers a licensing regime lighter than strict-tier regulators (FCA, ASIC, CySEC). In the context of the Caucasus and Central Asia, the most common offshore licences are the Seychelles FSA (Financial Services Authority of Seychelles), the Belize FSC (Financial Services Commission of Belize, also known as the IFSC), and the Vanuatu VFSC. An offshore licence is legitimate — it represents real regulatory oversight — but typically carries fewer mandatory protections for retail clients than a strict-tier licence. Most global brokers serving Georgia, Kazakhstan and Azerbaijan do so through an offshore entity.

**Segregated client funds** — client money held in a separate bank account from the broker's own operating funds, so that it cannot be used by the broker for its own purposes and is better protected in the event of broker insolvency. Segregation is required by strict-tier regulators (FCA, ASIC, CySEC) and is a key thing to check when evaluating an offshore broker's client-money policy — not all offshore licences mandate it. **KYC (Know Your Customer)** — the identity-verification process brokers conduct before activating a live account. Standard KYC requires proof of identity (passport or national ID) and proof of address (utility bill, bank statement). All licensed brokers are required to conduct KYC under anti-money-laundering regulations.

• Offshore regulator: a lighter-framework licensing authority — legitimate but fewer mandatory protections.
• Seychelles FSA: the Financial Services Authority of Seychelles — the most common offshore licence in our broker set.
• Belize FSC / IFSC: the International Financial Services Commission of Belize — another prevalent offshore regulator.
• VFSC: Vanuatu Financial Services Commission — an offshore regulator used by some global brokers.
• FCA: Financial Conduct Authority (United Kingdom) — strict-tier; 30:1 retail leverage cap, negative-balance protection.
• ASIC: Australian Securities and Investments Commission — strict-tier.
• CySEC: Cyprus Securities and Exchange Commission — strict-tier; EU regulatory framework.
• FSCA: Financial Sector Conduct Authority (South Africa) — mid-tier.
• Segregated client funds: client money held separately from the broker's own funds.
• KYC (Know Your Customer): identity and address verification required before a live account is activated.
• AML (Anti-Money Laundering): regulatory framework brokers must follow, including KYC requirements.
• Negative-balance protection: a regulatory requirement (FCA, ASIC, CySEC) preventing retail clients from losing more than their account balance.

What funding and withdrawal terms matter most for residents of Georgia, Kazakhstan and Azerbaijan?

**SWIFT transfer** — an international bank wire that uses the Society for Worldwide Interbank Financial Telecommunication network to move funds between banks in different countries. SWIFT transfers are widely available from Georgian and Kazakhstani banks for funding offshore broker accounts; they typically carry a fixed fee (USD 15–30 per transfer is common, though rates vary by bank) and take one to five business days. In Azerbaijan, SWIFT availability is narrower and cross-border transfer caps apply (reported at around USD 1,000 per day and USD 10,000 per month for AZN-denominated outward transfers).

**E-wallet / payment processor** — digital payment intermediaries (e.g. Skrill, Neteller, Perfect Money) used to fund broker accounts. E-wallets are sometimes preferred where a local bank card is declined for forex-related payments — a common issue for some Kazakhstani card issuers. They add a processing layer but can bypass certain card-scheme restrictions. Not every broker supports every e-wallet; check the broker's current deposit-methods page for your country. **Base currency** — the currency in which a trading account is denominated (e.g. USD, EUR). Where a broker does not offer a lari (GEL), tenge (KZT) or manat (AZN) base account, a conversion applies when depositing in local currency, which adds currency risk and conversion cost to the trading account.

• SWIFT: international bank wire network — widely used for broker funding from Georgia and Kazakhstan.
• E-wallet: digital payment intermediary (Skrill, Neteller, Perfect Money) — alternative when cards are declined.
• Base currency: the account denomination — USD/EUR are most common; local currency accounts are rare.
• AZN transfer cap: Azerbaijan cross-border cap (~USD 1,000/day, ~USD 10,000/month) — a funding throttle, not a trading ban.
• Currency conversion: cost applied when depositing in a currency that differs from the account base currency.
• Card decline: some Kazakhstani and Azerbaijani card issuers decline forex-related payments — e-wallet is often the workaround.
• Withdrawal track record: how reliably and quickly a broker has historically processed client withdrawals — a key due-diligence point in markets without local supervision.

Sources & further reading

• Bank for International Settlements — FX Turnover in Global FX Markets
• MetaQuotes — MetaTrader 4 and MetaTrader 5 platform documentation