Knowledge base
Trading glossary
The terms you'll meet across CFD trading, strategies and yield, explained in plain English.
Section 01
CFD & market basics
- CFD (Contract for Difference)
- A derivative contract that lets you speculate on the price movement of an asset — such as a currency pair, index or commodity — without owning the underlying asset. You profit or lose based on the difference between the opening and closing price of the position.
- Leverage
- Trading with borrowed capital so a small deposit (margin) controls a larger position. Leverage of 1:100 means $1,000 of margin controls a $100,000 position. It magnifies both gains and losses.
- Margin
- The amount of your own capital required to open and maintain a leveraged position. If your equity falls below the required maintenance margin, positions may be reduced or closed.
- Spread
- The difference between the bid (sell) price and the ask (buy) price of an instrument. The spread is the most visible cost of trading — tighter spreads mean lower trading costs.
- Pip
- The smallest standard price increment in a currency pair. For most forex pairs a pip is 0.0001; for JPY pairs it is 0.01. Profits and losses in forex are often measured in pips.
- Lot
- A standardised trade size. In forex a standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.
- Swap (overnight financing)
- The interest paid or earned for holding a leveraged position overnight. Swap rates depend on the instrument and the interest-rate differential of the underlying currencies.
- Slippage
- The difference between the price you request and the price at which your order is actually filled, usually caused by fast-moving markets or low liquidity.
Section 02
Orders & risk management
- Stop-loss order
- An order that automatically closes a position at a predefined price to cap your loss on a trade. A core risk-management tool for both CFD and funded-account trading.
- Take-profit order
- An order that automatically closes a position once it reaches a predefined profit level, locking in gains without you watching the market.
- Risk-reward ratio
- The amount you risk on a trade compared with the amount you stand to gain. A 1:3 risk-reward ratio risks $100 to target $300.
- Equity
- Your account balance plus or minus the floating profit and loss of open positions. Prop challenge drawdown rules are usually measured against equity.
- Drawdown
- The decline in account value from a peak to a trough, expressed as a percentage or amount. Prop firms set maximum daily and overall drawdown limits that traders must stay within.
Section 03
Prop trading
- Prop (proprietary) trading firm
- A company that gives traders access to its own capital. Traders typically pass an evaluation (challenge) to prove their skill, then trade a funded account and share the profits with the firm.
- Trading challenge / evaluation
- A structured assessment in which a trader must hit a profit target while respecting drawdown and conduct rules. Passing the evaluation qualifies the trader for a funded account.
- One-step vs two-step challenge
- A one-step challenge has a single evaluation phase before funding; a two-step challenge adds a verification phase with a lower target. One-step programs are faster, two-step programs usually cost less.
- Funded account
- The account a trader receives after passing an evaluation, backed by the firm's capital. Profits generated on the account are shared according to the agreed profit split.
- Profit split
- The percentage of profits a funded trader keeps versus what the firm retains. FXPolo funded traders keep up to 90% of the profits they generate.
- Profit target
- The percentage gain a trader must reach during an evaluation phase to progress — for example 8% in phase one of a two-step challenge.
- Scaling plan
- A published schedule for increasing a funded trader's capital allocation as they demonstrate consistent, rule-compliant performance over time.
- Payout
- The withdrawal of a funded trader's share of profits. Payout cycles, minimums and methods are defined in the firm's program terms.
Section 04
Platforms & execution
- MetaTrader 5 (MT5)
- A widely used multi-asset trading platform offering advanced charting, algorithmic trading via Expert Advisors, market depth and a built-in economic calendar.
- WebTrader
- A browser-based trading platform that requires no download — you log in and trade from any device with full access to your account.
- Copy trading
- A service that automatically replicates the trades of a chosen strategy provider in your own account, in proportion to your allocation, while you retain control over risk limits and exits.
- Execution speed
- The time between placing an order and its confirmation by the server. Faster execution reduces slippage, particularly during news events and volatile sessions.
- Economic calendar
- A schedule of upcoming macroeconomic releases — such as central-bank rate decisions, inflation and employment data — that commonly move the markets.
Ready to explore FXPolo CFD trading?
Open a live account or practise through a demo before entering the market.
CFDs are leveraged products and involve a high risk of losing money. Leverage can magnify both gains and losses. Make sure you understand how CFDs work and whether you can afford the risk involved.