This section provides definitions for key terms used in forex and automated trading. It is essential reading for users seeking to understand the language of the market.
- Automated Trading - The use of computer systems to generate buy and sell orders, or signals, that are carried out automatically. It is also known as "algorithmic trading," "black-box trading" and "robotic trading."
- Average Profit Trade (APT) - A calculation of the gross profit divided by the number of profitable trades in USD.
- Average Trade Time (ATT) - The average holding period of each trade, in hours.
- Average Losing Trade (ALT) - A calculation of a system's gross loss divided by the number of losing trades in USD.
- Bid - The price at which the market is prepared to buy a specific currency in a pair. At this price, which is shown on the left side of the quotation, the trader can sell the base currency.
- Base currency - The first currency listed in a quote, which shows how much it is worth as measured against the second currency.
- Currency - Any form of money issued by a central bank or government that is used as legal tender and a basis for trade.
- Currency pair - The two currencies that make up a foreign exchange rate; for example, GBP/USD.
Currency symbols -
The symbols used to denote currencies. Among the most commonly used are:
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
JPY - Japanese Yen
GBP - British Pound
CHF - Swiss Franc
- Days in System (DIS) - The number of days since the system generated its first trading signal.
- Forex - This refers to foreign exchange, the exchange of one currency for another. While most trading is done by a few hundred such institutions, Forex is traded "over the counter" on an inter-bank system, a network of several thousand banks.
- Forex market hours - The forex market is open for trade 24 hours a day, unlike most other trading markets. Three major periods define the daily forex market: the Tokyo, London and New York trading sessions.
- Hypothetical results - The performance results given for systems, which may have inherent limitations since it is not claimed that any account will or is likely to achieve profits or losses similar to those shown. Due to the volatility of the markets, there may sometimes be variations between the performance results and the actual results. All signals and trades executed in a demo account are considered hypothetical.
- Hedging - The practice of opening several positions at once, whereby one position minimizes the risk of another position.
- Initial margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.
- Limit order - An order to close a trade when the market moves a specified amount to the advantage of a position.
- Leverage - The ratio of the amount used in a transaction to the required security deposit; it is also called margin.
- Lot - A trading unit to measure the amount of a deal; the value of the deal always corresponds to an integer number of lots.
- Largest Losing Trade (LLT) - A system's trade that resulted in the largest loss in USD.
- Largest Winning Trade (LWT) - The trade that resulted in the largest profit in USD.
- Margin - A good faith deposit that traders put up as collateral to hold positions. The amount of margin that traders put up determines their leverage.
- Margin call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.
- Market maker - A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
- Maximum Positions (MP) - The number of positions a system can hold in a pair simultaneously. For example, a system with six maximum positions can open six positions at the same time; if users trade this system at 0.1 lot, they could have six positions open at 0.1 lot (60,000).
- Maximum Draw Down (Max DD) - The maximum loss from a peak to a valley of a portfolio, before a new peak is attained. The larger the Max DD, the larger the downside risk over a specified time period
- Pip - The smallest unit of price for any foreign currency. These are usually digits added to or subtracted from the fourth decimal place, e.g. 0.0001. They are also called points.
- Position - The netted total holdings of a given currency.
- Profit / Loss - Profit / Loss - The difference between the open price and the current price in a transaction, multiplied by the number of lots in the order. A positive value indicates a profit, while a negative number indicates a loss. It is also known as "P/L" and Gain / Loss.
- Portfolio - A collection of investments owned by the same individual or organization. In the DupliTrade platform, this includes the systems that a trader uses.
- Performance - In automated trading, this refers to the success of a system in terms of profit generated, net pips accumulated and risk adjustment rate, among other things.
- Profit Factor - Gross profits divided by gross loss; the larger this number is the better it is.
- Profit ($) - Profit or loss generated by a system using trade sizes of 100,000, including carry cost.
- Pay Off (PO) - The expected Pay Off (average profit per trade) is calculated by the profit divided by the total number of trades.
- Quote - An indicative market price for a currency pair that is normally used for information purposes only.
- Rollover - The simultaneous closing of an open position for the day's value date and the opening of the same position for the next day's value date at a price reflecting the interest rate differential between the two currencies.
- Rate - The price of one currency in terms of another, typically used for dealing purposes.
- Risk management - The employment of financial analysis and trading techniques to reduce and / or control exposure to various types of risk.
- Round trip - The purchase and sale selling of a specified amount of currency; this is also known as a round turn.
- Resistance - A specific price ceiling at which technical analysis concludes that traders will sell; this is the opposite of support.
- Reverse strategy - The reversal of the strategy implemented by a system, whereby its signals execute the opposite orders to those originally intended; for example, Buy signals become Sell signals. It is also known as "contrarian trading."
- Risk Adjustment Rate (RAR) - A direct measure of a system's return, calculated by dividing the return of the strategy (net profits) by the maximum drawdown; the larger this number is the better it is.
- Spread - The difference between the bid and offer prices for a currency pair.
- Sell order - An instruction to a broker, bank, market maker, or other financial institution to sell a currency.
- Short sale - When the base currency in the pair is sold, the position is said to be short. These are positions that benefit from a decline in market price.
- Stop entry - An order to buy below or sell above the market at a pre-specified value. It is used when assuming the price will continue going in the same direction.
- Stop-loss - An order to close a trade when the market moves a specified amount against the position.
- Swap - The simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate/
- Support - A specific price floor at which technical analysis concludes that traders will buy; this is the opposite of resistance.
- Strategy Provider - The person or group that creates computer systems that in turn generate signals.
- Signals - Buy and sell orders generated by computer systems according to a set of predefined rules. In automated trading, the signals can be executed without human intervention.
- Systems - Sets of predefined rules, or algorithms, written in computer code in order to establish signals, which are either buy or sell orders.
- Start Date - The day the system was added to the trading platform.
- Technical analysis - The art of forecasting price movements through the study of chart patterns, indicator signals, sentiment readings, volume and open interest. It does not focus on economic data, unlike fundamental analysis, but rather on interpretation of price data.
- Trailing stop loss - A feature attached to stop-loss orders, whereby the stop position is automatically moved to the trader's advantage as the market moves to their advantage.
- Tick - A minimum change in price, up or down.
- Turnover - The total money value of all executed transactions during a given time period; this is also known as volume.
- Win% - The percentage of a system's wining trades out of the total amount of opened trades.