June 24, 2019
the purposes of this document, and for an understanding of general industry
terms, we have put together a list of terminology definitions:
- Brokerage = legal entity allowed to open customer accounts and collect customer money.
- Broker = an employee of the brokerage that is working with a customer.
- Introducing broker = independent company that is bringing customer to the broker in-
- exchange of remuneration. (usually 1 PIP).
- Prime Broker = an entity that is willing to represent the brokerage in all its trading
- 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.
- ECN = electronic trading system which pairs offer and demand without a middle man (in this Case Forex).
- Forex = foreign currency exchange.
- Customer or client or end user = a private or commercial entity that opens an account with the brokerage.
- Wire = electronic money transfer.
- Self-traders = customers that direct the trading of their own money.
- Managed accounts = customers that open an account, deposit money but who give
- power of attorney to 3rd party to initiate trades in their account.
- Dealer = a human or computer software that will monitor the risk taken by the brokerage.
- Trading platform = a computer software that gives access via the internet to humans or
- other computer programs to the information they need to monitor trading information.
- Trades = (Forex context) the action of buying or selling one currency in exchange of for another.
- P&L = profit and loss.
- Deposit currency = currency of the money deposited in his account held at the brokerage by the client.
- Margin trading = allowing the customer to borrow money automatically when he is placing a trade.
- Margin currency = currency used for the margin.
- Pair = (Forex context) a symbol one can trade.
- Front end = the part of the trading platform that seen by the brokerage client.
- Back end = part of the trading platform only seen by the brokerage employees.
- Rates = exchange rates.
- Counterparty = entity that will take somebody’s account, money and will allow the
- account opened to trade against the deposit.
- 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.