ForeX Terminology (for Dummies)

Terminology for begginers

 

MT4: It is the most popular Forex platform (acronym of MetaTrader version 4)

 

STP: Straight though processing.

 

STP Forex Company: A company which generates income from its clients’ trades and not from its clients’ wins or losses.

 

Market Maker: A forex company that makes profits out of its clients loses and vise versa (like the casino)

 

IBs: Introducing Brokers. Introducing Brokers, as the name suggests, are brokers who introduce clients to forex companies for a commission in return.

 

Liquidity Providers:  Banking institutions which specialize in the trade of large volume of complex and variable commodities (metals, currencies, CFDs). Such transactions cannot be executed by normal banking institutions.

 

Bridge:  A bridge in the forex industry is the tool which connects the various liquidity providers to the platform, which is then used by the traders (end users). The bridge executes the trades as given by the platform to the LPs.

 

APMs: Acronym for Alternative Payment Methods these are payment institutions where end users can transfer funds to the forex company in order to trade. They are not by any means banking institutions but rather like an advanced on line ATM machine.

 

Pips: Decimal Places

 

Negative Balance Protection: When the trader position becomes negative, Forex Companies tend to stop the trades so that their clients don’t have to put money to cover losses, so they are protected from downside.

 

White label solutions:  A solution offered by Forex companies to brokers with portolio but without license whereas the latter portray to be a fully license company by using the Forex Company infrastructure. The clients of the broker do not know that the broker is not using their own tools.

 

VPS: Virtual Private Server which is commonly provided by the Cyprus Forex Companies.

 

CFD: Contract for Difference. It is a derivative of financial product based on specified indices and it involves financing costs.

 

Majors: Reference to most traded currencies such as EURUSD, GBPEURO, AUDUSD

 

Minors: Reference to less traded currencies such as EUROGBP,EURCHF, GBOAUD

 

Exotics: These are not commonly traded currencies such as NOKSEK, USDZAR,USDHUF etc

 

Pairs: EURUSD is a pair of Euro and USD currencies.

 

Spot Metals: Gold (XAU) and Silver (XAG)

 

Lot: Quantity. Subject to what we are referring to a lot represents different amounts for different instruments.