This page holds definitions of some of the terms that we use elsewhere on this website, so that we can point you here if you don’t yet understand some of the unusual terminology traders use. If you wandered in here out of curiosity, and were hoping to find something more comprehensive, you might take a look at this site for all kinds of other definitions.
Flat
Flat is a term that traders use when there are no open-positions left on an account. And it’s also used to describe the intention of reaching that status. For example: “I am looking to go flat after this position closes”, or “I will be flat over the weekend”.
GDP
Gross Domestic Product is the total market price of all that a country produces, including services as well as goods. When an amount of currency is provided, it implicitly refers to the cost of one year’s worth of services and goods from the named country, or equivalently the total public and private expenditure within that country in a year.
Grid Trading
Grid Trading is a forex trading strategy that sets a series of positions. When lined up on a chart, it appears like a horizontal grid has been placed over the trading range. The objective is to set the first order position and then overlay the grid above or below as determined by the market and/or system. Typically as each predetermined take profit point is reached, a new order is entered as the previous position is closed.
Hedge
A hedge is a trade taken of equal value but in opposing direction to another currently open position. This serves to offset losses on the first position, which is sometimes desirable if the market is only temporarily moving against a core position.
It is also used in advanced trading techniques designed with hedging as an integral component to the system, such is the case with NMi’s Pendulum system.
Margin
How many dollars the broker sets aside from your account funds for X amount of order value, according to the leverage you have chosen for your trades. With a 500:1 leverage margin-policy, the broker sets aside $1 of your account for every $500 of order value.
For example, one full $100,000 lot would require $100,000/500 = $200 of margin, equivalent to 0.2% of the value of the lot. So, in theory you can trade with $100,000 of currency using only a $250 account, as long as you keep in mind that a 0.2% move against your $100,000 position will cause you to lose the $200 set aside as margin by the broker when you entered the trade.
Martingale
A system of successively increased betting/trading portions designed to overcome the previous loss.
That is, in theory, a mathematical 100% win scenario; however, eventual limitations on equity on an extended succession of Martingales does mean that eventually a total loss is inevitable. A system relying on Martingale alone will not provide a trading edge by itself, however it can and does provide a potentially highly profitable outcome within the confines of a well designed trading system.
Market Open Gap
On Friday the forex market closes at some price, X. Over the weekend anything can happen and when the market reopens (which is sometime on Sunday in FX land, depending on your timezone) the price could be X plus or minus plenty.
If that change in price skips past the hard-stop you might have set, your order will still close as soon as the market opens, only for a much bigger loss than you anticipated. Worse still, the gap may not close at all if your order is running naked (no hard SL).
Of course, the market could also skip in your favour, but it is generally considered prudent to close all open positions before the weekend, unless you run a particular strategy that is unaffected by this market trait (such as a long-term holding or carry trade).