In the context of forex and trading platforms like NetTradeX, PCI stands for Personal Composite Instrument.
Understanding Personal Composite Instrument (PCI)
According to the reference "Quick Guide for Creating and Trading Synthetic instruments", a Personal Composite Instrument (PCI) is defined as:
A synthetic instrument, created through Portfolio Quoting Method on NetTradeX terminal is called Personal Composite Instrument (PCI).
Essentially, a PCI allows traders to create their own unique trading instruments by combining various assets. This is done using a specific technique called the Portfolio Quoting Method within the NetTradeX trading terminal.
What is a Synthetic Instrument?
A synthetic instrument isn't a physical asset or a standard exchange-traded product. Instead, it's a financial tool constructed by combining two or more existing assets (like currencies, stocks, commodities, indices) to mimic the performance of a specific strategy or create a unique risk/reward profile.
How PCIs are Created
The creation of a PCI involves the following key elements:
- Portfolio Quoting Method: This is the specific methodology used to define the relationship and weighting between the constituent assets of the PCI. It allows traders to specify which assets make up the base (quoted) part and which make up the constituent (quoted) part of the synthetic instrument.
- NetTradeX Terminal: This is the trading platform where the Portfolio Quoting Method is implemented and PCIs are created and traded.
Key Characteristics of PCIs
- Customization: Traders can combine different assets in various proportions to reflect specific market views or strategies.
- Flexibility: Allows trading relationships between assets that aren't traditionally paired.
- Portfolio Management: Can be used to manage the value of a portfolio of assets relative to another asset or portfolio.
Example:
Imagine a trader wants to see the combined performance of Gold and Silver relative to the US Dollar. They could potentially create a PCI where the base asset is USD, and the quoted assets are a weighted combination of Gold and Silver. This creates a new, tradable instrument representing this specific relationship.
Using PCIs offers traders a sophisticated way to analyze and trade complex relationships between multiple financial assets, going beyond standard currency pairs or single assets.
