Forex FAQs
What is Forex?
The Foreign Exchange market, also referred to as the "Forex" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.2 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world's currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.Who participates in the FX market?
Central, commercial and investment banks have traditionally dominated the Forex market. Other market participation is rapidly increasing, and now includes international money managers and brokers, multinational corporations, registered dealers, options and futures traders, and private investors.When is the FX market open for trading?
Forex is a true global 24-hour marketplace. The trading day begins in Sydney, and moves around the globe as each financial center comes to life. Tokyo follows, then London, and finally New York. Investors can respond in real time to any fluctuations caused by current economic, social and political events.Where are Forex trades transacted?
Unlike stocks and futures, Forex transaction is not conducted on a regulated exchange with a specific location. There is no central location where trading takes place. The bulk of Forex trading is among large international banks and institutions that process transactions for large companies and governments. These institutions provide forex quotes on a continuous basis. Trading occurs via the internet, by telephone, and through computer terminals in different locations worldwide.What are the most common currencies in the Forex markets?
The most “liquid” currencies in the Forex market are those of countries with low inflation, stable governments, and respected central banks. Nearly 85% of daily transactions involve the major currencies, including the U.S. Dollar, Japanese Yen, the European Union Euro, British Pound, Swiss Franc, and the Canadian and Australian Dollars.What is a currency pair?
A currency pair is a Forex instrument, also known as a cross, for example USDJPY. When you trade in Forex, you always trade currencies in pairs. Thus in the example of USDJPY, this pairing indicates that you trade U.S. dollars against Japanese yen. If you buy dollars, you pay in yen, and if you sell dollars you receive yen.How are currency prices determined?
Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the Forex market makes it impossible for any one entity to "drive" the market for any length of time.Can you tell what will happen with the currencies, which will go up or down, etc.?
No. International currency prices are highly volatile and very difficult to predict. Due to such volatility, there is no system that could assure you that transactions on the foreign currency market should result in great benefits to you, nor is it possible to guarantee that your transactions would yield favorable results.Are stop loss orders guaranteed?
No, while stop loss orders are normally intended to limit losses to a certain amount, they are not guaranteed and may not effectively limit losses due to fluctuating market conditions. Clients must be aware that they are fully responsible for any and all losses incurred.
What is FIFO?
FIFO = First In, First OutIf a client makes a trade that is the opposite of one or more existing open positions, e.g. buys EURUSD and already has two open short EURUSD positions, the system will use the FIFO principle and automatically close out the oldest of the open positions. In the example, that would mean closing out the oldest of the short EURUSD positions.
How much money can I make?
If you get involved with the right company offering the proper education and mentoring, you can expect to create a financial performance expectation plan. Your plan will depend on how much you start out with, how knowledgeable and how unemotional you are. Never enter the market without first paper trading, which is trading pretend money. Once you achieve a track record of consistently completing successful trades and prove to yourself you can trade, then and only then, should you enter the market with your own money.What is Day Trading
Day Trading is when a trader buys and sells his lots or stocks that same day. He is in and out of the market that same day. He does not hold his position overnight or for a week, etcIs there a central location for the Forex Market?
Forex trading is not managed through an exchange. Since transactions are conducted between two counterparts, the FX market is an “inter-bank,” or over the counter (OTC) market.