What is a pip, spread, or margin? Clear, simple explanations of the core trading terms every beginner needs to understand.
The vocabulary of trading is dense enough that new South African traders frequently encounter the same problem: they follow a concept most of the way through, then get stopped by a term they haven't seen before. Looking it up yields a definition that introduces two more unfamiliar terms. The Beginners Glossary exists to break that cycle, providing definitions that explain not just what a term means but why it matters, how it connects to the concepts around it, and where it shows up practically in the decisions a retail trader actually makes.
The South African context changes how some of these concepts land in practice. Leverage means something different in a market where FSCA retail client limits apply than in a market where no such protections exist. A pip has a specific rand value at a specific account size that's worth understanding concretely rather than abstractly. Margin call dynamics connect to the rand's volatility in ways that affect ZAR-account holders differently from traders whose accounts are denominated in a less volatile currency.
This glossary is intended as a reference you return to rather than read through once. When you encounter a term in a TradeAnswers article, in your broker's platform, or in a piece of market commentary, the relevant entry here is designed to give you a complete enough understanding to continue reading intelligently, and to serve as a jumping-off point to the deeper articles on this site that cover each topic in full detail, including how spreads and margin actually work in practice.
Lot size refers to the standardised unit of trade volume, with standard, mini, and micro lots representing progressively smaller position si
A pip is the smallest standard price movement in a currency pair, typically the fourth decimal place.
The spread is the gap between an instrument's buy and sell price, and the most fundamental trading cost.
Margin is the deposit required to open and maintain a leveraged position, acting as collateral against potential losses.
A lot is a standardised unit of position size, with a standard lot equal to 100,000 units of the base currency.
Going long means buying with the expectation of a price rise; going short means selling first with the expectation of buying back lower.
Bullish describes an expectation that price will rise; bearish describes an expectation that price will fall.
The gap between what a broker will buy and sell an instrument for, one of the main ways brokers make money.
A pending order is an instruction set to execute automatically once price reaches a specified level, rather than executing immediately at th
A stop-loss automatically closes a losing position at a predetermined level; a take-profit does the same for winning positions.
A pending order executes automatically when price reaches a specified level, unlike a market order which executes immediately.
A limit order specifies a particular price for execution, while a market order executes immediately at the best currently available price..
Quoted price is what you see before placing an order, while execution price is what you actually receive, with any difference between them representing slippage..
An order book lists current buy and sell orders at various price levels, providing insight into market depth and liquidity at this specific moment..
The bid is the price you can sell at, the ask is the price you can buy at, with the gap between them representing the spread discussed elsewhere..
Slippage tolerance sets the maximum acceptable price deviation before an order is rejected rather than executed at a significantly different price..
Positive slippage means execution at a better price than requested, while negative slippage means a worse price, both falling under the broader slippage concept..
Equity is your account balance adjusted for the current floating profit or loss of all open positions, reflecting your true current account value..
Your account's base currency is the denomination your balance and profit or loss are displayed in, distinct from the base currency within any specific pair..
A leverage ratio like 1:30 means each unit of your capital controls 30 units of market exposure, a notation worth understanding precisely before trading..
This fee applies when a trade or deposit involves a currency different from your account's base currency, requiring an automatic conversion step..
Rollover rate refers to the specific interest rate differential applied when a position remains open overnight, directly determining swap charges or credits..
Maximum drawdown measures the largest peak-to-trough decline your account has experienced.
Volatility measures how much and how quickly an instrument's price fluctuates.
Liquidity describes how easily an instrument can be bought or sold without significantly affecting its price.
A tick is the smallest possible price movement for a given instrument, sometimes used interchangeably with pip but technically a distinct, related concept..
OTC, or over-the-counter, refers to trading conducted directly between parties rather than through a centralised exchange, describing most forex and CFD trading..
A whipsaw describes rapid, choppy price reversal shortly after entering a position, often triggering a stop-loss before the original anticipated move occurs..
Liquidation refers to a position being automatically closed by the broker, typically connected to the stop-out mechanism discussed elsewhere regarding margin..
Moving from demo to live too early, or the wrong way, is a common costly mistake.
A watchlist is a curated list of instruments you actively monitor, ideally limited to a deliberately focused selection matching your specific strategy..
A grounded, practical readiness checklist covering capital, knowledge, risk management, and psychology before opening your first live...