Forex & Trading Glossary

The lowest price a seller is willing to accept for an asset. Also called the offer price. In a forex quote, the ask is the price at which a trader can buy the base currency.

A technical indicator measuring market volatility by averaging the true range — the greatest of: current high minus current low, current high minus previous close, or previous close minus current low.

A set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. Brokerages must implement AML programs including customer due diligence and suspicious activity reporting.

The highest price a buyer is willing to pay for an asset. In a forex pair, the bid is the price at which you can sell the base currency. The difference between bid and ask is the spread.

A liquidity bridge connects a broker's trading platform to one or more liquidity providers (LPs). A-book orders are passed directly to the LP; B-book orders are filled internally by the broker acting as counterparty.

The operational side of a brokerage handling client account management, deposits, withdrawals, compliance, reporting, and KYC verification — separate from the front-end trading terminal.

The process brokerages use to identify and verify clients, assess risk levels, and understand the nature of their business. CDD ranges from simplified (low-risk clients) to enhanced (PEPs, high-risk jurisdictions).

A feature allowing clients to automatically replicate the trades of selected "master" traders in their own accounts, proportionally by capital. Brokerages earn fees from the copy trading subscription or performance commission.

An evaluation phase in a prop trading firm where a trader must meet defined profit targets while respecting drawdown limits and trading rules. Successful completion grants access to a funded account.

A system used by brokerages to manage client interactions, track leads, manage KYC statuses, monitor account activity, and handle communication. Purpose-built brokerage CRMs integrate with trading platforms.

A real-time display of buy and sell orders at different price levels for a given instrument. Also called the order book. Useful for identifying liquidity clusters and potential support/resistance levels.

The peak-to-trough decline in account equity during a specified period. Expressed as a percentage. Max drawdown limits are a core rule in prop firm challenges — breaching them typically voids the account.

A trading model where orders are sent directly to the exchange or liquidity pool without passing through a dealer. Provides faster execution and potentially better prices for institutional clients.

A type of trading model where client orders are matched against other participants (LPs, other traders) in a centralised network. ECN brokers offer variable spreads and often charge per-trade commissions.

The real-time value of a trading account: balance plus unrealised profit or minus unrealised loss on open positions. Equity fluctuates with mark-to-market price changes.

Financial Information eXchange — an industry-standard messaging protocol for real-time communication of securities transactions and market data. Brokerages use FIX to connect to liquidity providers and prime brokers.

The amount of available equity not currently being used as margin collateral for open positions. Free Margin = Equity – Used Margin. Determines how many additional positions a client can open.

A trading account provided by a prop firm to a trader who has passed an evaluation challenge. The firm provides capital; the trader shares a percentage of profits with the firm (typically 70–90% to the trader).

Buying an asset with the expectation that its price will rise. A long position profits when the price of the base currency (in forex) or the underlying asset increases from the entry price.

Selling an asset you don't own, expecting to buy it back at a lower price. A short position profits when the price falls. In forex, going short on EUR/USD means selling euros and buying dollars.

Opening a position to offset the risk of an existing exposure. Brokerages may hedge their net client book with an LP to reduce directional risk. Clients may hedge correlated instruments.

An individual or company that refers clients to a brokerage in exchange for commission (typically a revenue share or per-lot rebate). IBs do not hold client funds or execute trades directly.

One of the largest US-based brokerage platforms providing direct market access, often used as a prime brokerage or liquidity provider by retail FX brokers seeking bank-grade execution.

The process of verifying the identity of clients before allowing them to open accounts or trade. Includes identity document verification, proof of address, and sometimes source of funds declarations.

The time delay between sending an order and receiving a confirmation. Measured in milliseconds (ms). Low latency is critical for scalpers and HFT traders. NaxTrader's execution latency is sub-2ms at co-located infrastructure nodes.

The use of borrowed capital to control a larger position than the trader's own funds allow. Expressed as a ratio (e.g., 1:100 means $1 controls $100 of exposure). Increases both potential gains and losses.

A bank, prime broker, or non-bank market maker that supplies bid/ask quotes to a brokerage. The broker passes client orders (A-book) to the LP which fills them. LPs include Tier 1 banks, ECNs, and non-bank LPs like Finalto and IS Prime.

The amount of funds required to open and maintain a leveraged position. Expressed as a percentage or fixed amount. Margin acts as a security deposit, not a fee. If equity falls below required margin, a margin call is triggered.

A notification from the broker when a client's equity falls below a defined threshold (the margin call level). The client must deposit more funds or close positions. If equity continues to fall, a stop-out is triggered.

A broker that creates its own market by providing bid and ask prices and acting as counterparty to client trades. Market makers profit from the spread and may also B-book client trades.

MetaTrader 4 and MetaTrader 5 — the dominant white-label trading platforms for retail forex brokerages for two decades, developed by MetaQuotes. Increasingly being replaced by modern cloud-native alternatives.

A broker execution model where client orders are passed directly to liquidity providers without manual dealer intervention. Encompasses both STP and ECN models. Contrasts with a Dealing Desk (DD) model.

A document and identity verification provider used by brokerages for KYC automation. Clients submit passport/ID photos and a selfie; Onfido's AI verifies authenticity.

The smallest price move in a forex pair. For most pairs, 1 pip = 0.0001 (the 4th decimal place). For JPY pairs, 1 pip = 0.01. Pip value varies by lot size and account currency.

An open trade. A long position profits from a price increase; a short position profits from a price decrease. Position size is measured in lots, and exposure is calculated as lots × contract size.

A financial institution that provides bundled services to brokerages: credit facilities, custody, settlement, and aggregated liquidity from multiple market makers under a single relationship.

Trading with a firm's own capital (not client funds). In the modern retail context, "prop firms" evaluate retail traders via challenges and fund those who pass with firm capital, sharing profits.

A web application that can be installed on a device and behaves like a native app. Provides offline capability, push notifications, and a full-screen experience. Modern trading terminals are increasingly delivered as PWAs.

A commission model where a brokerage pays affiliates or IBs a percentage of the net revenue generated from referred clients. Typically expressed as a percentage of spread revenue or net P&L.

The core server-side component that monitors client positions, calculates real-time margin requirements, triggers margin calls, and executes stop-outs when equity thresholds are breached.

The difference between the expected price of a trade and the price at which it is executed. Positive slippage means a better fill than requested; negative slippage means a worse fill, often during fast market conditions.

The difference between the bid and ask price of an instrument. The spread is the primary cost of trading for clients. Brokerages earn revenue from the markup they apply to LP spreads.

An execution model where client orders are automatically routed to liquidity providers without manual intervention. STP brokers typically pass orders to multiple LPs and fill at the best available price.

Automatic closure of a client's positions by the broker when equity falls below the stop-out level (typically expressed as a percentage of used margin). Protects both the client and broker from negative balances.

A KYC verification platform used by brokerages to automate client onboarding. Provides document verification, facial recognition, liveness detection, and AML screening against global watchlists.

The world's most popular charting platform with over 50 million users. Brokerages integrate TradingView's Advanced Charts into their trading terminals, giving clients a familiar and powerful charting experience.

The smallest possible price movement of a trading instrument in a given market. For forex, this is typically 0.00001 (a fractional pip). Each tick update represents real-time price data delivered to the terminal.

A contractual commitment by a software provider to maintain platform availability for a specified percentage of time. 99.99% uptime SLA means no more than ~52 minutes of downtime per year.

The size of a trade measured in lots. A standard lot = 100,000 units of base currency. A mini lot = 10,000 units; a micro lot = 1,000 units. Volume determines exposure and pip value.

An HTTP callback that delivers real-time data to a specified URL when a trigger event occurs. Brokerages use webhooks to integrate trading events (deposits, trade opens, KYC completion) with CRMs, Slack, and automation tools.

A fully branded trading platform built and operated by a technology provider but deployed under a brokerage's own brand. The brokerage customises colours, logo, domain, and app store listings without building from scratch.

The trading symbol for spot gold quoted in US dollars. One of the most liquid and widely traded commodities. Brokerages typically source XAU/USD from precious metals LPs or prime brokers.