Forex Terminology | Apexum

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Forex Terminology

June 24, 2019

Definitions

For the purposes of this document, and for an understanding of general industry terms, we have put together a list of terminology definitions:

  1. Brokerage = legal entity allowed to open customer accounts and collect customer money.
  2. Broker = an employee of the brokerage that is working with a customer.
  3. Introducing broker = independent company that is bringing customer to the broker in-
  4. exchange of remuneration. (usually 1 PIP).
  5. Prime Broker = an entity that is willing to represent the brokerage in all its trading
  6. transactions and settle the trades in your name. Usually requires a security deposit. Could be automatic or manual. Examples: Barclays, FC Stone, JP Morgan, etc.
  7. ECN = electronic trading system which pairs offer and demand without a middle man (in this Case Forex).
  8. Forex = foreign currency exchange.
  9. Customer or client or end user = a private or commercial entity that opens an account with the brokerage.
  10. Wire = electronic money transfer.
  11. Self-traders = customers that direct the trading of their own money.
  12. Managed accounts = customers that open an account, deposit money but who give
  13. power of attorney to 3rd party to initiate trades in their account.
  14. Dealer = a human or computer software that will monitor the risk taken by the brokerage.
  15. Trading platform = a computer software that gives access via the internet to humans or
  16. other computer programs to the information they need to monitor trading information.
  17. Trades = (Forex context) the action of buying or selling one currency in exchange of for another.
  18. P&L = profit and loss.
  19. Deposit currency = currency of the money deposited in his account held at the brokerage by the client.
  20. Margin trading = allowing the customer to borrow money automatically when he is placing a trade.
  21. Margin currency = currency used for the margin.
  22. Pair = (Forex context) a symbol one can trade.
  23. Front end = the part of the trading platform that seen by the brokerage client.
  24. Back end = part of the trading platform only seen by the brokerage employees.
  25. Rates = exchange rates.
  26. Counterparty = entity that will take somebody’s account, money and will allow the
  27. account opened to trade against the deposit.
  28. Rates and Quotes = (for Forex purposes) exchange rates.
  • Symbols and Instruments = the different exchange rates a counter-party is monitoring
  • and could offer to its customer for trading.
  • Marketing = the action of attracting interest from people and collecting their contact
  • information for commercial purposes.
  • Product = (Forex context) a type of service the broker can offer.
  • Sales = the action of selling a product to a customer.
  • Base currency = in a pair like EURUSD the 1st currency (in this case Euro).
  • Lot = (Currency context) usually 100 000 or 10 000 of the base currency.
  • Open P&L = the potential P&L of a trade if the trade was to be closed IMMEDIATELY but which is still open.
  • Balance = total amount in the client account NOT including the open P&L.
  • Equity = total amount of a client has IF the trades were closed IMMEDIATELY.
  • Pip = the smallest amount a currency will move by. Either 0.0001 or 0.01 if a pair involves Japanese Yen.
  • Margin call = when a customer equity is not enough to cover the margin he used to
  • borrow money to trade. typically, all Brokerages close the customer position automatically.
  • Bid = price at which one can SELL.
  • Ask = price at which one can BUY.
  • Spread = difference between bid and ask (spread = ASK-BID), calculated in pips.

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