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Frequently Asked Questions

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Forex trading has become very popular with the advent of the internet. There are so many different brokers out there and literally millions more

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Forex trading is highly popular online and another advantage of the online arena is that it can be 24/7 since all of the markets more

 
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Frequently Asked Questions (FAQ)

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Q: What is Forex?
A: Forex and ‘FX’ are shortened terms used for ‘foreign exchange’. Foreign exchange or ‘currency trading’ is the exchange of money from different countries. The value of one country’s currency is constantly changing against the value of another country’s currency. Forex traders make money through buying and selling currencies on the foreign exchange market.

Q: What is Forex trading?
A: Forex, Foreign Exchange Market, is an international exchange market where currencies from all around the world are traded. It involves buying and selling different currencies of the world.

Forex market is the largest trade market in the world, yielding $3.2 trillion daily. It is traded all around the world but United States, Japan, United Kindom, and Europes have the most active Forex traders.

Q: Who Are The Participants In The FX Market?
A: The Forex market is called an 'Interbank' market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.

Q: What should I look for in an online trading platform?
A: There are many online platforms available to trade with. Some key points to look for in the platform you choose:
-Level of personal service and support – live chat, SMS services
-Personal training
-Trading tools offered including charts, outlooks, news, financial calendars
-User friendly platform – can you do everything online or do you need to download software
-How quickly can you can start trading
-Easy deposit methods – e.g. e-wallets such as PayPal, credit cards, Wire Transfers
-24 hour access to your account
-Leverage offered
-Tailor-made accounts and spreads
-Real-time exchange rates
-No hidden costs – commissions on deposits or withdrawals
-No maintenance margins
-Cost of renewal/rolling fees for Day Trades
-Fixed rates and stop loss limits
-Security and safety of the site and your information
-A company that has a regulatory license for your region
-Genuine company with real people in real offices around the world.

Q: What is a Forward deal?
A: A forward deal is a contract where the buyer and seller agree to buy or sell an asset or currency at a spot rate for a specified date in the future (usually up to 60 days). Forward contracts are conducted as a way to cover (hedge) future movements in exchange rates. Margin spreads are higher than in Day Trading but no renewal fees are charged.

Q: What is Margin?
A: Margin is essentially collateral for a position. It allows traders to take on leveraged positions with a fraction of the equity necessary to fund the trade. In the equity markets, the usual margin allowed is 50% which means an investor has double the buying power. In the forex market leverage ranges from 1% to 2%, giving investors the high leverage needed to trade activly.

Q: How high are the risk in Forex trading?
A: The risks of losing money in Forex trading is high, but it is controllable via proper education and trading system. Trading system is a must in Forex trading. Charts, graphs, or pivot points are handful to indicate the right time to enter or exit the market. An 'automated system', such as make your easier As in any trade market, discipline, control of emotion, and money management are the traits needed to be succeed in Forex trading.

Rewards in Forex trading can be very lucrative if traders manage their risk nicely. One benefit to using our recommended brokerage firm is that they guarantee fills at your Limit and Stop-Loss order prices with no slippage.

This means you can have total control over the amount you risk on each trade. But remember, FOREX Trading is speculative and any capital used should be risk capital. In fact, we recommend that you trade on a demo account until you have shown profit for at least three consecutive months before trading real money.

Q: What is the difference between an "intraday" and "overnight position"?
A: Intraday positions are all positions which are opened and closed anytime during normal trading. Overnight positions are positions that are still on at the end of normal trading hours, which are usually rolled over by your Forex broker (based on the currencies interest rate differentials) to the next day's price.

Q: What tools do i need to start trading Forex?
A: It does not need a lot to start trading Forex: a funded Forex account and a computer with Internet connections are basically sufficient for you to start trading foreign currencies. However, proper Forex education and systematic trading tools are highly recommended to minimize your risks in Forex market.

Also, beginner traders are advised to start off their trading in Forex with a demo account first. A demo account is an account set up with 'play' money for the purpose of training and sharpen your trading skills. It's free to open a demo account with most of the Forex online brokers and it does not risk your real money in the trades.

Q: What is Margin?
A: Margin is essentially collateral for a position. It allows traders to take on leveraged positions with a fraction of the equity necessary to fund the trade. In the equity markets, the usual margin allowed is 50% which means an investor has double the buying power. In the forex market leverage ranges from 1% to 2%, giving investors the high leverage needed to trade actively.

Q: What is a pip?
A: Pip stands for "percentage in point" and it is the smallest increment by which a Forex cross price changes. Most currency pairs are quoted to four decimal places, meaning that a movement from 1.1850 to 1.1851 for a currency pair would constitute one pip. For a particular position, you can calculate the value of a single pip using the following formula. For instance, you know that the EURUSD is quoted with four decimals, so for a given position you can multiply the position amount by the value of one pip, or USD 0.0001. So, on a EURUSD 100,000 contract, one pip would equal USD 10. On a USDJPY 100,000 contract, one pip is equal to JPY 1,000 because USDJPY is quoted with only two decimals (meaning 1 pip = JPY 0.01).

Q: What is a currency pair?
A: 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.

Q: What is the spread?
A: The difference between the Bid price (at which you can sell the trading instrument) and the Ask price (at which you can buy the trading instrument).

Q: What is FIFO?
A: FIFO = First In, First Out
If 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.

Q: Where is the central location of the FX Market?
A: FX Trading is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over the Counter (OTC) or 'Interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.
 
 
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Risk Warning: Trading in forex and Contracts for Difference (CFDs) is highly speculative and involves a significant risk of loss. Such trading is not suitable for all investors so you must ensure that you fully understand the risks before trading.
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