What are the meanings of common trading conditions and terms?

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What are the meanings of common trading conditions and terms?

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Published in 2025.03.14

Updated in 2025.04.08

Starting Forex trading requires understanding the basic conditions and commonly used terminology. It's important not only to know about buying and selling currencies but also to grasp the mechanisms and risks involved, as well as to develop a trading strategy. In this section, we will explain the essential conditions and terms for Forex trading in an easy-to-understand way. Please make use of this information.

List of Basic Terms in Forex Trading

Here is a concise summary of essential terms and their meanings in Forex trading.

Terms	Explanation
Spreads	In financial trading, the "difference" between the price to buy a symbol (Ask price) and the price to sell it (Bid price) is known as the spread. This spread represents the transaction cost for each trade, and therefore, a narrower spread is an important factor when choosing an FX broker.
Swap	It refers to the interest rate difference between two FX currency pairs. The interest generated on the position is called the swap points, and a swap occurs when the position is carried over to the next day.*1
Leverage	It is a system that allows you to trade amounts larger than your actual funds. The higher the leverage, the larger the trading volume you can trade with compared to your available capital.
Order quantity unit	It refers to the unit that represents the trading volume when placing an order, determining the quantity or size of the asset being traded. In Forex trading, the order quantity unit commonly used is the "lot," and the amount of currency per lot is called the "contract size."
Margin Currency	It refers to the currency used to manage the margin required for trading. In Forex trading, instead of paying the full amount when holding a position, you deposit the required margin and use leverage on the margin to conduct the trade.
Effective margin	It refers to the amount that includes the account balance plus the unrealized profit or loss (unrealized gains or losses), and it is also used to calculate the margin maintenance ratio.
Required margin	It refers to the minimum amount of capital required to open a position. The required margin is calculated as contract size × quantity (lot size) ÷ leverage.
Excess margin	It refers to the funds available for new trades after subtracting the required margin for the positions currently held in the account. The excess margin is the amount remaining after deducting the required margin from the effective margin.
Displayed digits (Decimal places)	It refers to the number of decimal places shown when the price of a financial product is displayed. For example, for a symbol with the decimal places set to "3," the price will be displayed with three decimal places.
Tick	It refers to the data recorded every time the price fluctuates. A "tick" occurs with each price movement, and the recorded price changes are referred to as a "tick chart."
Tick size	It refers to the smallest unit of price movement, also known as the tick size.
Tick value	It refers to the amount of profit or loss caused by a one-tick movement. It is determined by the tick size (the smallest price movement) and the trade size (lot size), and is used for profit and loss calculation for each trade.
Stop level	It refers to the minimum distance that must be maintained from the current rate when placing a limit order or stop order. At FXON, the stop level is set to 0 for all products, allowing for more flexible trading.
Limit price level	It refers to the price range set for a limit order, which is determined by the trader based on their trading strategy.
Long	It refers to a buy position for a particular symbol. This position is opened when the trader expects the price to rise in the future. If the price increases from the entry point and the position is closed, a profit can be made; however, if the price falls, a loss will occur.
Short	It refers to a sell position for a particular symbol. This position is opened when the trader expects the price to fall in the future. If the price decreases from the entry point and the position is closed, a profit can be made; however, if the price rises, a loss will occur.
Take profit (T/P)	It refers to closing a position that is currently showing unrealized profit in order to lock in the gains and realize the profit.
Stop loss (S/L)	It refers to closing a position that is currently showing an unrealized loss in order to lock in the loss and realize the loss.
Margin call	It is a warning that notifies you when the margin level falls below a certain level, indicating that there are insufficient funds to maintain your positions. When a margin call is triggered, risk management actions such as adding more funds to your account or closing some positions are required. At FXON, a margin call is triggered when the margin level falls below 50%.
Stop out	It is a process where positions are automatically closed when the margin level further decreases and falls below a certain level. This system is in place to prevent losses higher than the deposited funds. At FXON, stop out is triggered when the margin level falls below 20%, and positions are automatically closed.
Negative balance protection	It is a system that resets the account balance to zero in the event that the balance turns negative due to sudden market fluctuations, making it impossible to execute a stop loss in time. At FXON, we implement this system, which ensures that even if your balance goes negative, you will not incur losses exceeding your deposited funds.

Terms	Explanation
Spreads	In financial trading, the "difference" between the price to buy a symbol (Ask price) and the price to sell it (Bid price) is known as the spread. This spread represents the transaction cost for each trade, and therefore, a narrower spread is an important factor when choosing an FX broker.
Swap	It refers to the interest rate difference between two FX currency pairs. The interest generated on the position is called the swap points, and a swap occurs when the position is carried over to the next day.*1
Leverage	It is a system that allows you to trade amounts larger than your actual funds. The higher the leverage, the larger the trading volume you can trade with compared to your available capital.
Order size unit	It refers to the unit that represents the trading volume when placing an order, determining the quantity or size of the asset being traded. In Forex trading, the order quantity unit commonly used is the "lot," and the amount of currency per lot is called the "contract size."
Margin Currency	It refers to the currency used to manage the margin required for trading. In Forex trading, instead of paying the full amount when holding a position, you deposit the required margin and use leverage on the margin to conduct the trade.
Effective margin	It refers to the amount that includes the account balance plus the unrealized profit or loss (unrealized gains or losses), and it is also used to calculate the margin maintenance ratio.
Required margin	It refers to the minimum amount of capital required to open a position. The required margin is calculated as contract size × quantity (lot size) ÷ leverage.
Excess margin	It refers to the funds available for new trades after subtracting the required margin for the positions currently held in the account. The excess margin is the amount remaining after deducting the required margin from the effective margin.
Decimal places	It refers to the number of decimal places shown when the price of a financial product is displayed. For example, for a symbol with the decimal places set to "3," the price will be displayed with three decimal places.
Tick	It refers to the data recorded every time the price fluctuates. A "tick" occurs with each price movement, and the recorded price changes are referred to as a "tick chart."
Tick size	It refers to the smallest unit of price movement, also known as the tick size.
Tick value	It refers to the amount of profit or loss caused by a one-tick movement. It is determined by the tick size (the smallest price movement) and the trade size (lot size), and is used for profit and loss calculation for each trade.
Stop level	It refers to the minimum distance that must be maintained from the current rate when placing a limit order or stop order. At FXON, the stop level is set to 0 for all products, allowing for more flexible trading.
Target price	It is also referred to as the limit price level, which is the price range set for a limit order based on the trader's trading strategy.
Long	It refers to a buy position for a particular symbol. This position is opened when the trader expects the price to rise in the future. If the price increases from the entry point and the position is closed, a profit can be made; however, if the price falls, a loss will occur.
Short	It refers to a sell position for a particular symbol. This position is opened when the trader expects the price to fall in the future. If the price decreases from the entry point and the position is closed, a profit can be made; however, if the price rises, a loss will occur.
Take profit (T/P)	It is also referred to as Profit Realization, which occurs when a position that you hold shows unrealized profits and is closed to lock in the gains.
Stop Loss (S/L)	It refers to closing a position that is currently showing an unrealized loss in order to lock in the loss and realize the loss.
Margin call	It is a warning that notifies you when the margin level falls below a certain level, indicating that there are insufficient funds to maintain your positions. When a margin call is triggered, risk management actions such as adding more funds to your account or closing some positions are required. At FXON, a margin call is triggered when the margin level falls below 50%.
Stop out	It is a process where positions are automatically closed when the margin level further decreases and falls below a certain level. This system is in place to prevent losses higher than the deposited funds. At FXON, stop out is triggered when the margin level falls below 20%, and positions are automatically closed.
NBP	NBP stands for Negative Balance Protection, which is a system that resets the account balance to zero in the event that the balance turns negative due to sudden market fluctuations, making it impossible to execute a stop loss in time. At FXON, we implement this system, which ensures that even if your balance goes negative, you will not incur losses exceeding your deposited funds.

*1Swap Calculation Method: Daily Swap Amount = Lot Size × Swap Points × Contract Size × Decimal places

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What are the meanings of common trading conditions and terms?

List of Basic Terms in Forex Trading

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