The acronyms and jargon that are part of the online forex trading industry can often create confusion and misunderstanding for those who are relatively new to the business. As seasoned industry consultants who help entrepreneurs launch their own forex brokerages, we understand the need to understand the basic concepts behind the business.
Imagine a scenario where a broker receives an order to buy 100,000 of EUR/USD. In the case of an A book broker, this order would immediately be forwarded, or passed on to the liquidity provider that the broker has partnered with. So to revisit the example, if the trader places a buy order, the broker will also place the same buy order with its liquidity provider.
The forex industry has a variety of acronyms and industry terminology that can often be confusing to newcomers. Because this is industry is still relatively new when compared to the stock market or futures, it’s often challenging to find a reliable source of information that adequately explains various market terminology.
STP is an example of one of these concepts. You may have seen it on a broker website or in a forum discussion but not understood what it meant. Similar to other terms, STP is quite simple to follow once it is explained.
The first step in the process of launching your own forex brokerage is to incorporate a new company. Depending on your specific requirements, this could be an offshore incorporation. In some cases, you may opt to apply for a forex broker license.
Once the new forex broker has been incorporated, you’ll need a way to both receive and make payments. This is where the bank accounts comes in, which will serve two purposes. First, you’ll need to offer your traders a way to send money to your newly formed forex brokerage.
For those who are looking to launch their own forex brokerages, many terms and phrases can appear intimidating at times. The term liquidity, for example, can often conjure up images of waterfalls or rivers. New entrepreneurs to the forex industry might ask why is liquidity important when starting my own forex broker?
A good place to start is to define exactly what liquidity stands for. As you’ll shortly notice, the term liquidity is not as intimidating as it may appear at first glance. A basic definition of liquidity is the pricing and order execution that each forex broker uses to operate the business.