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Glossary
Order: Instructions given from the electronic platform to trade.
Swap: Credit or debit incurred from the interest rate on investors’ open positions. Tom-next swaps are typically used in leveraged FX trading.
Opposite transaction: Taking short position against the long position or vice versa.
Leverage ratio: The ratio that indicates how many positions can be taken according to the collateral posted.
Leveraged transaction: Electronically trading foreign currencies, commodities, precious metals and other assets by using a certain amount of leverage without physical delivery.
Electronic Transaction Platform: A platform where traders may trade with leverage and monitor live FX prices as well as their portfolios.
Spread: The difference between the bid/ask prices.
Base currency: The currency that is quoted in relation.
Term currency: The currency that is used as the reference.
Long position: The position taken by buying the base currency. In this position, the investors profit when the value of the base currency appreciates.
Short position: The position taken by selling the base currency. In this position, the investors profit when the value of the base currency depreciates.
Open position: A position which is not closed out and where there are no realized profits or losses.
Closed position: Executing the opposite transaction of the open position to realize the profit and loss.
Collateral: The equity that is required to buy/sell a currency pair.
Initial Margin: The minimum amount of equity to open up a new position.
Maintenance margin: The minimum equity needed in order to carry the position.
Demo transaction platform: A simulation where the investor can trade virtually and execute transactions with real time or delayed prices of the market
Pip: Often denoted as “bips,” a unit equal to 1/10.000 of currency prices.
Risk notification: A statement of the risk and possible losses that the investor can encounter whilst trading in leveraged markets.
Value date: Value date is the future date on which the trade will be settled. In case of a spot foreign exchange trade, this is normally two days after execution. (t+2 days after the transaction). Only USDCAD, USDRUB and USDTRY’s value dates are t+1.
Stop losses: Market order to close a position if/when the loss reaches a threshold.
Marker order: Buy or sell order to be executed immediately at current market prices. The order is filled at the best price available at the respective time.
Limit order: A limit order is an order to buy or sell an underlying at a specified price. This gives the trader the control over the price at which the trade is executed. However, since the order is off market it may never be executed if the price does not reach the specified levels.
Buy limit: The order to buy at a lower price then the current market price
Sell limit: The order to sell at a higher price then the current market price
Buy stop: A buy stop order is typically used to limit a loss (or to protect an existing profit) on a short sale. A buy stop price is always above the current market price. This allows traders to limit their losses (if the stop price is at or above the purchase price) or secure some their profits.
Sell stop: A sell stop is an order typre to sell at the best available price after the price retreats below the stop price. A sell stop price is always below the current market price. This allows investors to limit their losses or (if the stop price is at or below the purchase price) secure some their profits.
The validity period of the order: Indicates how long the order is valid for.
Margin call: Margin call is the additional collateral required to post if the collateral retreats below the maintenance level.
Scalping: Executing transactions within a short time span with small price differences.
Balance: The cash held in the account as collateral.
Equity: Account value calculated by adding/ deducting loss/profit and swap credit/debit.
Margin: The amount used to open a position.
Free margin: The amount that can be used to open a new position besides the existing position.
Margin level: Obtained by dividing the equity by margin and multiplying with 100%.
Target spread: The best spread that can be obtained in a normal market condition. In volatile markets, spread may widen after the related markets closes.
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