Investor dictionary: test your knowledge
If you are investing in trading strategies of traders, you should know the professional terms of the FOREX market. We offer you to test your knowledge. Do you know all these terms?
1. Drawdown-decrease of funds on the trading account as a result of opening a losing trade.
Drawdown can be of 5 types:
Current, working drawdown — time drawdown, which resulted from the open losing trades.
Fixed drawdown drawdown resulting closed losing trades trader.
Maximum drawdown-shows the level of the maximum loss of the Deposit as a result of closing losing trades for the entire trading period. An indicator is considered within the framework of the transactions closed. The maximum drawdown for the investor is a key indicator at the time of choosing a trading strategy.
Relative drawdown-shows the maximum decrease in funds relative to the initial Deposit.
Absolute drawdown-shows how much the balance decreased relative to the initial Deposit.
2. Stop-loss order, which is set to limit losses to the level of allowable losses. When setting a stop loss, it is recommended to take into account the trader's trading strategy: the more aggressive the strategy, the greater the amount of allowable losses.
3. Take profit-an order that allows you to take profit when a certain price is reached.
4. Volatility is a statistical indicator that characterizes the trend of price volatility.
5. Liquidity is an economic term for the ability of assets to be sold quickly at a price close to the market.
6. Liquidity providers are companies that have contractual relations with a group of banks and other financial institutions for the supply of quotations to brokers for their transmission to traders. The more final counterparties have relations with the liquidity provider, the higher liquidity and speed of execution of orders by the broker.
7. Forex kitchens are brokers that do not withdraw their trades to liquidity providers. "Kitchens" trade against the client and are interested in his loss. It is not safe to work with such companies, as there is a high risk of losing their capital not only due to market risks, but also due to operating (broker intervention in trade).
8. Diversification-the division of investments into different trading strategies in order to reduce the risk of potential losses.
9. Manager's reward — the amount (from 0 to 50%), which is the reward of the trader, whose trading strategy you copy. The reward is paid only when the trader has a positive trade (in particular when investing in RAMM accounts).
10. Profit-income, profit (eng.).
11. State list (when investing in PAMM accounts)-the history of all trading operations within a particular account. The state list should be read to understand the nature of the trader's trading strategy. In it you can see the maximum drawdown in the trade.
(In RAMM accounts, you do not have to request a state list, since all trading strategy operations can be viewed on the platform online, which makes it more convenient and transparent in operation.)