Glossary

Forex and trading glossary

61 terms explained in plain English — with the Canadian context most glossaries leave out.

A

Accredited investor: An investor who meets income or asset tests under National Instrument 45-106 (for individuals, e.g. net income over $200,000 — or $300,000 with a spouse — in each of the last two years, or financial assets over $1 million). Some dealers only offer CFDs to Albertans who qualify. Learn more →
AMF: Autorité des marchés financiers — Québec's regulator for securities, derivatives and insurance. Administers Québec's Derivatives Act. Learn more →
Ask: The price at which you can buy. Always higher than the bid; the difference is the spread.

B

Bank of Canada (BoC): Canada's central bank. It sets the policy interest rate eight times a year and publishes daily exchange rates. Learn more →
Base currency: The first currency in a pair. In USD/CAD, the U.S. dollar is the base currency — the quote tells you how many Canadian dollars one U.S. dollar costs.
Bid: The price at which you can sell.
Binary option: A contract paying a fixed amount or nothing depending on a yes/no condition. Binary options with terms under 30 days are prohibited for individuals throughout Canada. Learn more →

C

Carry trade: Holding a higher-yielding currency against a lower-yielding one to earn the interest-rate difference, paid as overnight financing.
CFD: Contract for difference — a derivative that pays the change in an asset's price without ownership. Legal in Canada through registered dealers. Learn more →
CIPF: Canadian Investor Protection Fund. Protects eligible client property if a CIRO member becomes insolvent, generally up to $1 million per account category. Doesn't cover trading losses or crypto. Learn more →
CIRO: Canadian Investment Regulatory Organization — the national self-regulatory organization for investment and mutual fund dealers, formed in 2023 from IIROC and the MFDA. Learn more →
Clone firm: A scam that impersonates a legitimate registered firm using its name, logo or registration details. Learn more →
Commission: A fee charged per trade, separate from the spread. Commission-based ('raw') accounts usually have tighter spreads.
Commodity currency: A currency whose value tends to track commodity prices — e.g. CAD (oil), AUD (metals), NZD (dairy).
Correlation: How closely two instruments move together. Positions in highly correlated pairs are effectively one larger bet.
Cross pair: A currency pair that doesn't include the U.S. dollar, such as EUR/CAD or GBP/JPY.
CSA: Canadian Securities Administrators — the umbrella organization of Canada's 13 provincial and territorial securities regulators. Learn more →

D

Demo account: A practice account with virtual money on a broker's live platform. Learn more →
Drawdown: The decline from a peak in account equity to a subsequent low, usually expressed as a percentage. Learn more →

E

ECN: Electronic communication network — a model where orders are matched against prices from multiple liquidity providers, typically with raw spreads plus commission. Learn more →
Expert advisor (EA): An automated trading program for MetaTrader. Learn more →

F

FHSA: First Home Savings Account — a registered account for first-time home buyers with deductible contributions and tax-free qualifying withdrawals. Can hold stocks and ETFs, not leveraged forex.
Financing (swap / rollover): The interest credited or charged on leveraged positions held past the daily 5 p.m. ET rollover.
Fundamental analysis: Analysing economic data, central-bank policy and other drivers to form a view on a currency.

G

Gap: A jump in price between one trade and the next, often over weekends or after major news. Stops can be filled at the gapped price.
Guaranteed stop: A stop-loss order the dealer guarantees to fill at your price, usually for a premium.

H

Hedging: Taking a position to offset risk in another — e.g. a Canadian business selling USD forward to lock in a rate.

I

IIROC: The Investment Industry Regulatory Organization of Canada, which merged with the MFDA in June 2023 to form CIRO. Learn more →

L

Leverage: Using margin to control a position larger than your deposit. 30:1 leverage means a 3.33% margin rate. Learn more →
Limit order: An order to buy or sell at a specified price or better.
Liquidity: How easily an asset can be traded without moving its price. Major pairs are highly liquid; exotics much less so.
Loonie: Nickname for the Canadian dollar, after the loon on the one-dollar coin. Learn more →
Lot: A standard trade size: standard = 100,000 units, mini = 10,000, micro = 1,000. Learn more →

M

Margin: The deposit required to open and hold a leveraged position. Learn more →
Margin call / closeout: When account equity falls below required margin, the dealer can demand more funds or close positions automatically.
Market maker: A dealer that quotes prices and takes the other side of client trades.
Market order: An order to buy or sell immediately at the best available price.
MetaTrader (MT4/MT5): Popular retail trading platforms by MetaQuotes, offered by several CIRO dealers. Learn more →

N

National Registration Search: The CSA's public database of registered firms and individuals in each province and territory. Learn more →
Norbert's Gambit: A technique to convert CAD to USD cheaply using an interlisted security such as DLR/DLR.U. Learn more →

O

OBSI: Ombudsman for Banking Services and Investments — a free, independent dispute-resolution service for clients of participating firms, including CIRO dealers.
Offshore broker: A broker licensed in a light-touch jurisdiction and not registered in Canada. Learn more →

P

Pip: The standard unit of price movement: 0.0001 for most pairs, 0.01 for yen pairs. Learn more →
Pipette: One-tenth of a pip — the fifth decimal (third for yen pairs).
Policy rate: The Bank of Canada's target for the overnight rate, its main monetary-policy tool.
Position sizing: Choosing trade size so that a stop-loss costs a predetermined amount of your account. Learn more →
Prop firm: A company that sells trading evaluations and pays successful traders a share of (often simulated) profits. Not a registered dealer. Learn more →

Q

Quote currency: The second currency in a pair; profit and loss is calculated in it before conversion to your account currency.

R

Requote: When a dealer rejects your order price and offers a new one, typically in fast markets.
Risk-reward ratio: Potential profit on a trade compared with potential loss — e.g. risking 30 pips to make 60 is 1:2.
RRSP: Registered Retirement Savings Plan — tax-deductible contributions, taxable withdrawals. Can't hold leveraged forex or CFDs. Learn more →

S

Scalping: Very short-term trading targeting small price moves; highly sensitive to costs.
Slippage: The difference between the expected price of an order and the price at which it fills.
Spread: The difference between bid and ask — the main trading cost on spread-only accounts.
Stop-loss: An order that closes a position if price reaches a set level, limiting the loss (subject to gaps and slippage).
STP: Straight-through processing — routing client orders to liquidity providers rather than taking the other side. Learn more →

T

Technical analysis: Studying price charts, patterns and indicators to make trading decisions.
TFSA: Tax-Free Savings Account. Investment growth and withdrawals are tax-free, but frequent trading can make gains taxable as business income. Learn more →
Trailing stop: A stop-loss that moves with the price by a set distance, locking in gains.

U

USD/CAD: The U.S. dollar–Canadian dollar exchange rate; the most traded CAD pair. Learn more →

V

Volatility: How much and how quickly prices move. Higher volatility means wider stops and smaller positions for the same risk.