1, point PIP
The smallest unit of exchange rate movement is the point. If the exchange rate of EUR/USD rises from 1.2250 to 1.2251, then the change is exactly 1 point. The last digit of the foreign exchange quote is the ones of the points, the second last digit is the ten digits of the points, and so on.
2, spread SPREADS
The spread is the difference between the bid price (Bid) and the ask price (Ask). The smaller the spread between the bid price and the ask price, the lower the cost for the investor. After long-term trading, the size of the spread has a greater impact on the overall profit and loss of short-term investors, and has little impact on medium and long-term investors. Take the euro/dollar as an example: the bid price (Bid) is 1.4390, the selling price (Ask) is 1.4393, and there is a 3 point spread between the bid and ask prices. If you want to buy EUR at this time, it will be traded at 1.4393, and the profit and loss will show a loss of 3 points, which is -30 USD (3*$10=$30). This $30 loss can be seen as the cost of opening a position. The spread is actually the cost of our transaction.
3, point value PIP VALUE
The point value is the value of a point between the bid price and the selling price when trading forex. Please refer to Forex calculation for details.
4, Margin/Leverage MARGIN
Margin refers to the funds paid by the buyer or seller in accordance with the standards stipulated in the trading market, and is used exclusively for settlement and performance guarantee of order transactions.
Used margin = lot * contract unit / leverage
Used Margin for Gold and Silver = Lots * Contract Units * Market Price / Leverage
The margin for CFD CFDs is fixed
Available Margin = Net Value - Used Margin - Spread
5, Margin VARIATION MARGIN
The margin call is specified by the clearing house. When the amount of the member's margin account is short, the margin is required to be maintained at the initial margin level, and the member is required to increase the deposit. The day's equity minus the position margin is the fund balance. If the equity of the day is less than the margin of the position, it means that the balance of the fund is negative, and it also means that the margin is insufficient.
6, contract number CONTRACT SIZE
The number of contracts in foreign exchange is also called the contract unit, which is the volume of the transaction itself, which is the amount of money to buy/sell. For example, in foreign exchange, 100,000 contract units are 1 standard lot, also called 100K (K=kilogram), which means that the minimum trading share per sheet is 100,000 base currencies.
7, STP
STP full name Straight though processing straight-through processing, is a bridging method, no trader backstage (traders backstage, English is dealing desk, often translated as "trader platform") in which quotes and control market prices (ie no City), all customer orders are passed directly to the liquidity provider (or liquidity provider, that is, other brokers and banks), and the bid/ask price is determined by those liquidity providers. The STP platform without the trader's back office directly bridges all order information to the liquidity provider, and the liquidity provides the business with the opposite position of the customer to trade, and at the same time, the position is closed by the subsequent transaction with the other party, in order to obtain profit.
Three key elements of the STP Forex platform
1) Liquidity provision
The ECN trading platform will transfer orders to the ECN liquidity pool, which has a large number of liquidity providers that trade between banks.
The STP platform has its own internal liquidity pool, which consists of predetermined liquidity providers, and only those liquidity providers that have signed contracts with STP brokers will be there. These liquidity providers offer the best buy/sell prices for orders from the STP trading platform. The better the liquidity, the better the buy/sell price will be, and the lower the spread will be. If there is only one liquidity provider, there is no price competition between the liquidity providers, which is equivalent to just adding a middleman to trade inside.
2) Spread type
Fixed-point spread STP forex platform: The spread is not adjusted based on the minimum buy-and-buy bid price among multiple liquidity providers, and the spread is always fixed. If the STP broker has only one liquidity provider, the role of the liquidity provider is the only counter-party of the trader, in which case the buy/sell price is determined by the liquidity provider.
STP forex platform with floating spreads: Liquidity providers offer the best buy/sell bids, STP brokers choose the best bid price from one liquidity provider, choose one from another circulator The bid price so that you can provide the lowest trading spreads for your customers.
3) Instant execution or market execution
Immediate execution means that the order will not enter the market directly and will be processed by the broker first.
The market price implementation mentions that the order information is sent to the market, and the price is determined by the liquidity provider in the market.
Providing market-executed STP brokers to provide direct market access to customers DMA (Direct Market Access)
8, ECN
ECN is the Electronic Communication Network (ECN), which makes the orders of ECN users directly anonymously hang on this network. The buying and selling price is all the transactions involved in this ECN environment, including individual investors, small banks, Investment institutions, hedge funds, etc., in accordance with the optimization of price and time, fair and harmonious.
Broadly speaking, the ECN model includes STP bridging. The biggest advantage of ECN is fairness. The true ECN mode is only responsible for delivering customer orders and earning commissions. Customer orders are in this ECN liquidity pool and other. The counterparty trades, and the counterparty may be a hedge fund, a banking institution or a non-banking institution, or other investors. Moreover, because ECN brings together a large amount of liquidity, these liquidity providers will have a bid between them in order to obtain more orders, so that customers can enjoy lower transaction costs, that is, spreads. And instant transactions at the fastest speed. However, the threshold of the ECN account is relatively high, and there are certain requirements for the initial size of the account, the number of transactions, and the transaction volume, which are suitable for institutional investors and large fund accounts.
9, EA
Expert Advisor is the Chinese translation of Expert Advisor (EA). It can also be translated as “Expert Advisor”, commonly known as Expert Advisor, which is a machine trading process performed by a computer simulation trader's order operation; the computer is based on a pre-edited trading strategy program. To execute a trade order. The automatic trading strategy mainly includes three elements: order execution, risk management and fund management.
The Expert Advisor is an international financial currency trading system that runs on a specific trading platform. The principle is to write an effective international financial currency trading strategy into a computer program in a special programming language (MQL/Java/C++). The established conditions automatically execute positions and buy and sell, and the outcome of winning and losing depends on the quality of the strategy of the trading system.
The complete trading logic includes:
1, the admission conditions are judged;
2, judgment of position conditions;
3, position control;
4, the appearance of the judgment.
Traders can write their own trading strategies into EAs, call for various indicators, price loops, historical data comparisons, etc. can be achieved in the EA through programming methods. The computer is much faster than the human brain, so it can quickly trade in some fleeting entry opportunities, greatly improving the quality of trading behavior.
The quality of the intelligent trading system depends directly on the trading strategy set by the trader. A good trading strategy can achieve stable profitability, even if the loss occurs, it will be controlled within a very small range, and the bad trading strategy may be This causes the trading account to have a huge loss or even a short position in a very short period of time. Currently, there are two types of EAs in the market: fully automatic and semi-automatic. The fully automatic EA will completely implement the trading strategy autonomously, while the semi-automatic ones need manual assistance to place orders or close positions.
Traditional EA is divided into: grid type, trend type, hedging type, arbitrage type
10, market maker (MM/MARKETS MAKER)
Refers to some independent securities dealers in the financial market, for investors to bear the purchase and sale of a certain securities, buyers and sellers do not have to wait for the counterparty to appear, as long as there is a market maker to bear the counterparty to conclude a transaction . Through this continuous trading, market makers maintain market liquidity and meet the investment needs of public investors. The market maker compensates the cost of the service provided by the appropriate difference in the price of the purchase and sale, and realizes a certain profit.
In essence, the emergence of market makers stems from the imbalance between buying and selling. In a market that lacks liquidity, this difference in time and space leads to the inability of the transaction to be realized because the buyer and the seller do not necessarily appear or trade the same number of products at the same time. The emergence of market makers has made it possible to trade in demand at different times.
It’s characterized by:
1) In the profit model, profit is controlled by controlling the bid-ask spread, and there is no obvious speculation intention;
2) In terms of trading methods, market makers need to provide bilateral quotations to the market, and they do not know the direction of the opponent's buying and selling in advance, which is a passive trading in the market, and to a certain extent has the effect of stabilizing market price fluctuations;
3) Risk management, due to the light trading, market makers mainly adopt a hedging method to manage inventory risks;
4) Market-making obligations, if the customer needs to give a quotation at the time of inquiry, the bid-ask spread must be within a certain range, and the minimum trading volume must comply with the regulations;
5) Liquidity provision, when the market liquidity is lacking or the price fluctuation is severe, the market maker makes the transaction realized by providing the quotation.
According to the coexistence model of the bidding system, the market maker system can be divided into a pure market maker system and a hybrid market maker system. The so-called pure market maker system means that the transaction of a certain product is completely completed by the market maker. The so-called hybrid market maker system means that the transaction of a certain product may be completed through bidding transactions or through market makers, and is a mode in which bidding and market makers coexist.
However, the market makers of the MM model usually classify the customers, resulting in multiple obstacles such as slippage, difficult orders, repeated quotations, etc., and the market makers and customers conduct gambling transactions, usually with a large chance of winning, while transparency is high. It depends on the market maker itself.
11. Bid/Bid Price ASK
The purchase price is the price at the foreign exchange market that is willing to buy a particular currency pair. The trader can sell the base currency at this price, which is to the left of the quotation. For example, the USD/Swiss franc is quoted at 1.4527/32 and its purchase price is 1.4527; that is, you can sell $1,527 for the $1.
The selling price is the price at the foreign exchange market that is willing to sell a particular currency pair. The trader can buy the base currency at this price, which is on the right side of the quotation. For example, the USD/Swiss franc is quoted at 1.4527/32 and its selling price is 1.4532; that is, you can buy 1 USD for 1.4532 CHF. The foreign exchange selling price is also called the selling exchange rate.
12, spread SPREAD
The spread is the difference between the bid price and the ask price.
13. Quote method QUOTATION
Exchange rates in the foreign exchange market are expressed in the following format:
Base Currency / Quote Currency Buy/Sell Price
Such as: EUR/USD 1.2604/07, GBP/USD 1.5089/94, Swiss Franc/JPY 84.40/45
Normally, only the last two numbers are displayed. If the selling price exceeds the buying price by 100 points, then there will be three numbers to the right of the slash (eg Euro/Czech 32.5420/780). This happens only when the quote currency is very weak.
14, Liquidity LIQUIDITY
Liquidity is actually the ability of investors to quickly trade a certain amount of assets at a reasonable price based on the basic supply and demand conditions of the market. Simply put, liquidity is the cost of quickly executing a certain number of transactions. The higher the liquidity of the market, the lower the cost of conducting an instant transaction. In general, lower transaction costs mean higher liquidity, or a correspondingly better price. How to measure liquidity?
Market Depth: The depth indicator is mainly the depth of the quote, which is the number of orders at a certain price (usually the best bid price).
The depth of the deal: the size of the deal, which is an afterthought indicator that measures the number of trades at the best bid-ask price.
Deep improvement: refers to the case where the order is sold at a price equal to or better than the quoted price when the quantity of the order exceeds the quantity on the best bid-ask price.
Turnover rate: The ratio of the submitted orders actually executed in the market. The transaction rate includes three indicators: one is the probability of the entire real-time transaction of the market order and the limit order that is better than the best bid price; the second is the ratio of the order to the total price of the order; the third is the volume of the order when the order part is executed. The ratio. The turnover rate is also a very important indicator for limit orders that are inferior to the best bids.
15, overnight interest SWAP
In foreign exchange trading, each transaction involves two currencies, including two different interest rates, and the payment or collection of interest is based on the interest difference between the two and the direction of the position. The interest rate is calculated based on the difference between the currency interest rates of the two countries. When the investor sells a currency with a higher interest rate/lower interest rate, it needs to pay overnight interest; when the investor buys a higher interest rate / sells the interest For currencies with lower rates, you can earn overnight interest. Interest is deferred according to bank practice in accordance with T+2, that is, two banks start counting after the working day. See Forex calculations
Overnight interest = annual interest rate difference / 360 days * 1 bidder contract unit * lot * exchange rate price (multi / empty) * interest days
16, Clearing CLEARING
Throw risk out to the market or liquidity provider (banking institution)
17, scalp SCALP
The scalping transaction refers to a fast-forward and fast-out ultra-short-term trading method, which means that trading investors frequently perform orders and close positions in a very short period of time. Very simple fast forward and fast out of short-term trading. This kind of requirement for investors to make certain accurate judgments on market trends and support resistance levels, and then use high-leverage interest rates to make profits is a mode of profitability mostly based on probability.
18, PAMM (PERCENTAGE ALLOCATION MANAGEMENT MODULE)
The PAMM management model is an abbreviation of Percentage Allocation Management Module, which refers to a kind of customer wealth management account. Investors and account fund managers distribute profits according to the agreed proportion. Investors can use the wisdom and rich trading experience of the PAMM account manager to invest money into the PAMM account, and the account manager uses a centralized management interface to trade on his behalf. The account manager draws a portion of the proceeds from the transaction proceeds as management compensation.
19, MAM (MULTIPLE ACCOUNT MANAGEMENT)
MAM is a multi-account management software that helps professional traders to manage multiple accounts. The MAM account can add an unlimited number of trading accounts, and the distribution mode can be allocated in percentage or asset proportion. MAM account orders can be sold in batches, multiple management accounts can be assigned instantaneously, or all orders can be filled, which is set for the fund manager.
20, LAMM (LOT ALLOCATION MANAGEMENT MODULE)
The LAMM management model is an abbreviation of the Lot Allocation Management Module, which means that the money manager has the ability to separately trade different customer accounts and manage them through a single interface, so that the money manager can trade and supervise multiple Account and print reports for multiple accounts without having to log in to each customer account separately. Since the money manager manages each customer's account separately, the margin, profit and loss and rollover fees of different customers will be different. LAMM is a total management account. Customers must sign a Limited Power of Attorney to entrust the trader to manage their trading account with the LAMM account, and the client's account will be placed under LAMM. Each time the LAMM account is placed, you can choose to operate on those accounts under the name and set the amount of operation. Accounts under the LAMM name are read-only accounts and customers are not allowed to trade on their own. Customers can complete the “Revocation of Limited Power of Attorney” to evacuate their account from LAMM, after which the customer can trade their own account.
