There are many Forex terms a FX Professional have to know to do a great job and to be successful. In order to help Brokers and Traders to get to know the basics of the FX industry, the Advanced Markets Team created this glossary.
Discover the Advanced Markets FX dictionary here and feel free to contact us if you want us to add further terms!
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
Algo Trading – a method of executing a large order (too large to fill all at once) using automated pre-programmed trading instructions accounting for variables such as time, price, and volume to send small slices of the order (child orders) out to the market over time. They were developed so that traders do not need to constantly watch a stock and repeatedly send those slices out manually.
ASIC (Australian Securities and Investments Commission) – Australia’s corporate, markets and financial services regulator.
Block Trade – also known as a block order, is an order or trade submitted for the sale or purchase of a large quantity of securities.
Brokerage (Forex) – Firms that provide currency traders with access to a trading platform that allows them to buy and sell foreign currencies.
CFD (Contract for Difference) – a contract between two parties, typically described as “buyer” and “seller”, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time (if the difference is negative, then the buyer pays instead to the seller). In effect CFDs are financial derivatives that allow traders to take advantage of prices moving up (long positions) or prices moving down (short positions) on underlying financial instruments and are often used to speculate on those markets.
Custodian Bank – a specialized financial institution responsible for safeguarding a firm’s or individual’s financial assets and is not engaged in “traditional” commercial or consumer/retail banking such as mortgage or personal lending, branch banking, personal accounts, ATMs, etc.
CySec (Cyprus Securities and Exchange Commission) – the independent public supervisory Authority responsible for the supervision of the investment services market and transactions in transferable securities carried out in the Republic of Cyprus.
Depth of Market (DoM, Market Depth) – a measure that provides an indication of the liquidity and depth for that security or currency. The higher the number of buy and sell orders at each price, the higher the depth of the market. Depth of market data is also known as the order book, since it shows pending orders for a security or currency.
ECN (Electronic Communication Network) – an automated system that matches buy and sell orders for securities. It connects major brokerages and individual traders so they can trade directly between themselves without going through a middleman and make it possible for investors in different geographic locations to quickly and easily trade with each other.
Expert Advisor (EA) – a software program that analyzes data and provides a trader with buy and sell recommendations that fit within the trader’s strategy. Much like a trader, an expert advisor analyzes historical data and forecasts future price movements using this data. Unlike a human trader, expert advisors are able to integrate a huge amount of data and process it very quickly for the purpose of forecasting.
FOK (Fill or Kill) – Order filled for entire amount or rejected for entire amount.
FCA (Financial Conduct Authority) – a financial regulatory body in the United Kingdom, but operates independently of the UK government, and is financed by charging fees to members of the financial services industry. The FCA regulates financial firms providing services to consumers and maintains the integrity of the UK’s financial markets. It focuses on the regulation of conduct by both retail and wholesale financial services firms
FIX API (Financial Information Exchange Application Programming Interface) – is a highly scalable electronic communication protocol to facilitate the real-time exchange of information related to financial markets. It has become the de facto standard method of pre-trade, trade and post-trade communication. Market participants including banks, hedge funds, prime brokers and “prime of primes” utilize FIX for their own trading needs or to connect directly to clients.
Foreign Exchange (Forex, FX) Market – is a global decentralized or Over The Counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices.
Forex CRM (Customer Relationship Management System) – a streamlined solution for Forex brokers that integrates with trading platforms, payment gateways, and other tools. It allows forex brokers to log leads/potentials into the system and pass them to sales representatives based on assignment rules, which can be customized.
FX Regulatory Jurisdiction / Foreign Exchange Regulation – a form of financial regulation specifically aimed at the Forex market which is decentralized and operates with no central exchange or clearing house.
GTC ( Good Till Cancel) – An order to buy or sell at a fixed price that remains in place until it is either executed or is canceled. Does not expire at the end of the trading day.
HK3 – one of the four state-of-the-art Equinix International Business Exchange™ (IBX) data centers in Hong Kong.
Institutional / Wholesale Trader – buys and sells securities for accounts they manage for a group or institution.
IOC (Immediate or Cancel) – order, filled for available amount, remaining amount will be canceled.
Limit Order – orders executed at the requested price or better.
LD4, LD5 – one of many state of the art IBX centers in key metropolitan areas throughout EMEA that offer a full range of premium colocation, interconnection and support services to a wide range of secure digital ecosystems built by networks, enterprise, content, cloud and IT services companies and financial institutions.
LEI Number – (Legal Entity Identifier) – a unique identifier for persons that are legal entities or structures including companies, charities and trusts.
The Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code, to uniquely identify legally distinct entities that engage in financial transactions.
Leverage – is a loan that is provided to an investor by the broker that is handling his or her forex account.
LFSA (Labuan Financial Services Authority) – the statutory body responsible for the development and administration of the Labuan International Business and Financial Centre (Labuan IBFC). More on Labuan Money Broking License here.
Liquidity – The ability of a market to accept large transaction with minimal to no impact on price stability.
Liquidity Provider – an individual or institution which acts as a market maker in a given asset class. This means that the liquidity provider will act as the both the buyer and seller of a particular asset, thus making a market.
Lot, standard – is the equivalent to 100,000 units of the base currency in a forex trade. A standard lot is similar to trade size. It is one of the three commonly known lot sizes; the other two are mini-lot and micro-lot.
Manual Trading – a trading system that involves human decision-making for entering and exiting trades. This is in contrast to automatic trading, which employs programs linked to market data, which are able to originate trades based on human instructional criteria.
Margin – The required equity that an investor must deposit to collateralize a position.
Margin Aggregation – aggregation of price feed from two or more Prime of Prime providers or retail FX brokerages. An arrangement where the client must keep margin at each prime of prime separately.
Markup – the spread or charge that may be included in the final price of a transaction in order to compensate the Market Participant for a number of considerations, which might include risks taken, costs incurred, and services rendered to a particular Client.
MiFID 2 – (Markets in Financial Instruments Directive) – designed to offer greater protection for investors and inject more transparency into all asset classes: from equities to fixed income, exchange traded funds and foreign exchange.
MT4 (Metatrader 4) – an online trading platform, designed by MetaQuotes Software and released in 2005. It is licensed to many forex brokers who customize it and then offer it to clients. MetaTrader 4 also comes in a mobile version, allowing traders to trade over their mobile devices.
MT5 (Metatrader 5) – an institutional multi-asset platform offering trading possibilities and technical analysis tools, as well as enabling the use of automated trading systems (trading robots) and copy trading. MetaTrader 5 is an all-in-one platform for trading Forex, Stocks, Futures and CFDs.
Multi Account Manager (MAM) – a plugin originally designed for the Meta Trader 4 Platform to allow the proportional (or any set) profit and loss distribution from Fund Manager (or Master) to Investors (or Sub Accounts).
Net Open Position (NOP) – The total value of all open positions combined.
NY4 – Located within the Equinix Secaucus NJ campus, features direct interconnections to massive financial services and electronic trading ecosystems.
Prime Broker (PB) – An entity that provides credit intermediation to one or more parties to a trade based on pre-agreed terms and conditions governing the provision of such credit. The Prime Broker can also offer subsidiary or allied offerings, including operational and technology services..
Prime Brokerage Participant – Market Participant that is either (i) a Prime Broker, (ii)a Client using the services of a Prime Broker, or (iii) a Market Participant acting as an executing dealer (price maker) or execution intermediary (such as an Agent or platform) between the Prime Brokerage Client and the Prime Broker.
Prime of Prime – brokerage institution that provides access to the interbank liquidity through a single connection to its aggregated feed. Prime of Prime gains access to interbank liquidity through Tier 1 Prime Brokerage arrangement.
Retail Trader – often referred to as individual traders, buy or sell securities for personal accounts.
Risk Management – To hedge one’s risk they will employ financial analysis and trading techniques.
Segregated Account – a separate account used by brokers to keep their customers’ money separate from the firm’s money. This is done for a few reasons, including creating a clear separation between the two groups of money so neither is used for the wrong purpose, and also to insure that the money can be easily identified as belonging to customers in case anything happens to the firm
Slippage – occurs when trade’s execution price for the market order does not match the price requested by the trader.Could be positive (price improvement), or negative.
Spread – the difference between the bid and offer prices.
STP (Straight-Through Processing) – an initiative that financial companies use to optimize the speed at which they process transactions.
Stop Loss Orders – A contingent order that triggers a buy or sell order for a specified notional amount when a reference price has reached or passed a predefined trigger level. There are different variants of Stop Loss Orders, depending on the execution relationship between counterparties, the reference price, the trigger, and the nature of the triggered order. A series of parameters are required to fully define a Stop Loss Order, including the reference price, order amount, time period, and trigger.
SYOB (Start Your Own Brokerage) – a program that includes a number of turnkey packages with different service bundles to accommodate any business model.
Toxic FX Flow – can take many forms: it can be the trading on invalid market rates, the trading on the inefficiencies of non-sophisticated FX technology or trading in the same direction, across multiple trading venues at the exact same time. Toxic flow is generally viewed as unwelcome or predatory but what may seem toxic to one market maker may be welcome flow to another.
Trading (Trader’s) Cabinet – a private login area where a trader can manage all aspects of their trading environment.
Trading Platform – a software through which investors and traders can open, close and manage market positions.
Tripartite Account – see Segregated Account
VPS (Virtual Private Server) – allows traders, who use Expert Advisor (EA) automated trading systems, to minimize latency between the MT4 client terminal and the MT4 trade server. By running the system from a secure data center location, clients can also potentially receive the benefit of 100% up-time, resulting in significantly faster executions, higher trading volumes and fewer missed opportunities.
Yard – a financial term meaning one billion. Yard is derived from the term “milliard” which is used in some European languages and is equivalent to the number one billion used in American English. It is equal to 10y (10 to the ninth power), or the number one followed by nine zeros: 1,000,000,000. If someone were to purchase one billion U.S. dollars, he or she could refer to the purchase as “a yard of U.S. dollars.”
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Sources:
http://www.fixtradingcommunity.org
http://www.cysec.gov.cy/en-GB/cysec/vision-mission/
http://www.investopedia.com/
https://en.wikipedia.org/wiki/Foreign_exchange_market
http://www.equinix.com/locations/
https://en.wikipedia.org/wiki/Custodian_bank
http://thefxview.com/2013/10/31/what-is-a-liquidity-provider/
http://www.forexdictionary.com/definition/142/metatrader-4-mt4
https://www.metatrader5.com/en
https://en.wikipedia.org/wiki/Contract_for_difference
http://www.forexdictionary.com/definition/274/expert-advisor-ea
http://www.investorwords.com/7703/segregated_account.html
https://en.wikipedia.org/wiki/Algorithmic_trading
https://en.wikipedia.org/wiki/Financial_Conduct_Authority
https://www.scribd.com/document/349389333/fx-global#fullscreen&from_embed
https://en.wikipedia.org/wiki/Foreign_exchange_regulation
