1. What is the Foreign Exchange Market?
The foreign exchange market (forex, FX, or currency market) is a global decentralized market where investors trade currencies. It is by far the largest traded market in the world.
2. Which currencies are traded in the forex market?
Here are the seven most liquid currency pairs in the world:
The four “majors”:
- EUR/USD (euro/dollar)
- USD/JPY (dollar/Japanese yen)
- GBP/USD (British pound/dollar)
- USD/CHF (dollar/Swiss franc)
3 commodity pairs:
- AUD/USD (Australian dollar/dollar)
- USD/CAD (dollar/Canadian dollar)
- NZD/USD (New Zealand dollar/dollar)
These currency pairs, along with their various combinations (such as EUR/JPY, GBP/JPY and EUR/GBP), account for over 95% of all speculative trading in FX.
3. How is currency traded?
Currency trading occurs when one country’s currency is traded for another country’s currency at the prevailing exchange rate. All currency trading is traded in amounts called LOTS. Each lot has a different amount of currency. For example; a Swiss Franc lot has 125,000 Swiss Francs in it. A trader does not buy lots in order to buy and sell it or trade it. A trader opens a margin account, enabling him the right to trade it.
4. What is a currency carry trade?
Carry is the most popular trade in the currency market, practiced by both the largest hedge funds and the smallest retail speculators. The carry trade
rests on the fact that every currency in the world has an interest rate attached to it.
5. How do you make money trading currencies?
Currencies are traded on a pip system. A pip is another word for a point in the currency trading arena. Traders are trying to capture points. Depending on the currency, each point is worth a different amount. For example; the British Pound is worth about $10 per point that is traded per lot. If you trade 1 lot and capture 40 points, you just made $400. If you trade 10 lots and capture 40 points, you just made $4,000.00, etc.
6. Commonly used Jargons
Here are some terms that will make you seem like a seasoned currency trader:
Cable, sterling, pound
Alternative names for the GBP
Nicknames for the U.S. dollar
Nickname for the Swiss franc
Nickname for the Australian dollar
Nickname for the New Zealand dollar
Loonie, the little dollar
Nicknames for the Canadian dollar
FX term connoting a round number like 1.2000
A billion units, as in “I sold a couple of yards of sterling.
7. Where do you get your currency rates?
We strive to always include the latest available market data from live rate feeds containing data from foreign exchange markets all around the world. Our sources are global, which means that data for a specific currency can be updated even when the markets of its home country are closed. Where a specific currency is not regularly traded, we use the most recent data available.
8. Am I buying actual currencies when I trade?
Each country has its own currency. Futures trading of currencies are done in trading pits, where you are trading those currencies today, but for future prices. FOREX trading is trading actual currencies at today’s exchange rate with banks. All trades are done through brokers or market makers.
9. Can Forex Trading Make You Rich?
Forex trading may be profitable for hedge funds or unusually skilled currency traders, but for average retail traders, forex trading can lead to huge losses. To trade profitably you must not only have winning trades, but must also cut your losing trades short so that the wins out-pace the losses.
10. Do people really become full-time traders?
Yes. You have to crawl before you walk. It takes time and discipline. It is just like starting any other business. Apply the right rules, attitude, and diligence and many folks then begin trading full-time.
A professional Forex trader is someone who uses price movement in the Foreign exchange currency market to make profit. The aim of any Forex trader is to win as many trades as possible and also to maximize those winning trades.
11. What is Leverage Trading?
Leveraged trading is one of the best advantages of trading forex. Using leverage, your net returns could be much greater than your initial investment. However, whilst your net returns could be much greater than your initial deposit.
12. What is Technical Analysis?
Technical analysis is the study of the price movement on a chart of a particular Forex currency pair or other market. The main reason that traders use technical analysis is to make predictions about future price movement based on past price movement.
13. What is Price Action Trading Analysis?
Price action analysis is the use of the natural price movement of a market to analyse and trade it. This means, you are making all of your trading decisions based only on the price bars on an indicator-free price chart.
14. What Are Realistic Goals for a Forex Trader?
A great goal is to focus on becoming a part-time trader and earning a nice profit while still maintaining your day-to-day income.
The first goal you should have is to trade your account to learn, not to make money. Learn as much as you can so that you don’t lose your money, leading to faster and longer-term success. Once you’ve done some study and have practiced trading for a while, when you’re comfortable to start increasing risk per trade, whether this means a transition from demo to live, or moving from risking $1 to $100 per trade, your objective is not to make a full-time income.