Forex Faqs Trading

Forex Trading FAQWhat is a PIP?What is Margin?What is rollover?What is a spread?What is Day Trading?How can I get started?How do I manage risk?How is currency traded?What is currency trading?What is a margin account?What is Foreign Exchange?How often are trades made?Is trading a form of gambling?How much money can I make?What is good judgment trading?Is Forex trading capital intensive?How does the Margin Call work?How long are positions maintained?How are currency prices determined?What do emotions have to do with it?When is the FX market open for trading?How does margin work in the FX market?What kind of trading strategy should I use?How is money made on trading currencies?Who are the participants in the FX Market?Am I buying actual currencies when I trade?Why is leverage important in the FX market?Why don't we hear more about the FOREX?What is a PIP? Back to Forex Faqs In the FX market, currencies are always priced in pairs. The quoted price is the level at which the forex market maker is willing to buy/sell the currency pair. In the wholesale market, forex currencies are quoted out to four decimal places, with the last placeholder called a point or a pip. A pip in most currencies is one divided by 10,000 of an exchange rate (in USD/JPY, it is one divided by 100)What is Margin? Back to Forex Faqs Margin is a performance bond for ensuring against various forex trading losses. The forex margin requirement allows you to grip a position that is larger than your actual account value. This online trading platform performs an automatic pre-trade check for margin availability, and executes only the trade if you have adequate forex margin funds in your account. The system also computes the forex trading funds required for present positions and displays as well as updates this information to you in genuine timings.What is rollover? Back to Forex Faqs Since every currency trade involves borrowing one currency to buy another, interest rollover charges are an inherent part of FX trading.Interest is paid on the currency that is borrowed, and earned on the one that is purchased. If a client is buying a currency with a higher interest rate than the one he/she is borrowing, the net differential will be positive – and the client will earn funds as a resultWhat is a spread? Back to Forex Faqs As with all financial products, FX quotes include a bid and ask price. The “bid” is the price at which a dealer is willing to buy (and clients can sell) the base currency in exchange for the counter currency. The “ask” is the price at which a dealer will sell (and clients can buy) the base currency in exchange for the counter currency. The difference between the bid and the ask price is referred to as the spread. The spread defines the trader’s cost, which can be recovered with a favorable currency move in the forex trading market. The pair of currencies being traded, the rate at which the currency pair is trading, and the size of the position being traded all may determine the value of a pipWhat is Day Trading? Back to Forex Faqs When a forex trader buys and sells his lots or stocks that same day. This is known as Day trading. In the same day, he is in and out of the forex market. He does not hold his position overnight or for a week, etc.How can I get started? Back to Forex Faqs You need to be very cautious and exercise due diligence. There are many numbers of international firms presenting numerous approaches to FOREX trading. Look before you leap. So do your homework and check references. Lots of companies prey on the greedy promising phenomenal returns that are only the exceptions, and not the rule! Find a company that doesn't swear the moon. If it sounds too good, it usually is. Reputable firms have credentials. Beware of "Black Box" systems. It is aligned with FTC regulations for a firm to suggest any guarantee of performance of any system. What one can guarantee and offer is that their forex trading methodology is sound, productive and profitable. But the forex trading decisions should not be made only by computers. A professional forex trader is a human being, with emotions, intuition and a brain to construe what the computer tells him. A forex trader is not a computer. A professional forex trader has been educated and is disciplined to live by his or her trading methodology of good judgment trading.How do I manage risk? Back to Forex Faqs While considering FX trading, the limit order and the stop loss order are the most common risk management tools. A limit order places restriction on the maximum price to be paid or the minimum price to be received. A stop loss order make certain that a particular position is liquidated at a predetermined price in order to bound that potential losses should make the forex market to move against an investor's position automatically. The liquidity of the Foreign exchange market also make sure about those limit orders and stop loss orders can be executed effortlessly. We also guarantee you regarding the execution of stop loss and other limit orders, at the specified price, and on all orders up to $1 million.How is currency traded? Back to Forex Faqs Each lot has a diverse quantity of currencies and all forex currency trading is traded in LOTS. For example; a Swiss Franc lot has 125,000 Swiss Francs in it. So as to buy and sell or trade large amount of currencies, a trader does not buy lots and for enabling the rights to the trader, he releases a margin account which also enables him the right to trade it.What is currency trading? Back to Forex Faqs Basically each and every country has its own currency. Currency trading takes place at the existing exchange rates condition when one country's currency is traded for another country's currency.What is a margin account? Back to Forex Faqs A margin account is nothing but a bond account and it functions similar to a savings account. Also you need to place a definite amount of money in what is called a forex margin account before the process of foreign exchange trading. You should guarantee other Fx traders that you can able to pay them if you lose and that account is overseen by your forex trading broker. While trading he monitors your forex account. He will not allow you to risk more than what are in your forex margin account. The margin account exists so, as you win on a daily basis, they have a place to deposit your money. Conversely, they will be having an account to withdraw the money whenever you used to lose it.What is Foreign Exchange? Back to Forex Faqs Foreign Exchange is the concurrent buying of one currency and selling of another. The world's currencies are on a floating exchange rate and are traded in pairs normally. For example Euro/Dollar or Dollar/Yen. The Foreign Exchange Market is known as "Forex" or "FX" market and with an average turnover of approximately US$1.4 trillion; it is the biggest financial market in the world today.How often are trades made? Back to Forex Faqs Market conditions dictate all the forex trading activities on any given day and as an orientation, the average small to medium forex trader might trade as often as 10 times a day. Our customers can also take positions again and again as necessary devoid of worrying about excessive transaction costsIs trading a form of gambling? Back to Forex Faqs All forms of Fx trading and investment can be construed as a form of gambling, even though neither will be the same as playing the lottery, roulette nor betting. Forex traders hunt for price fluctuations and investors seek return on investment. Both require a calculated risk that is being lessened by knowledge. Calculated risks are taken in all investments. People risk huge sums of money and not every one succeeds in that. Even when there is a track record of success as in many franchises there is still no guarantee. Their investment becomes a calculated risk. When you trade by unknowingly what you are doing, you are gambling. When you trade after you have been educated or mentored by a successful program, or by other successful forex traders, you are now taking a calculated risk.How much money can I make? Back to Forex Faqs You can expect to build a financial performance expectation plan if you get involved with the right company that tenders you the proper education as well as mentoring. Your plan will always be based upon how much you start out with and how knowledgeable as well as unemotional you are. Without having a basic knowledge of first paper trading, do not try to enter the market which is trading pretend money. At once you accomplish a track record of completing successful forex trades and prove to yourself you can trade, then and only then, should you enter the forex market with your own money.What is good judgment trading? Back to Forex Faqs Good judgment trading is the exact opposite of a Black Box System. It's merely an understanding of the Fx market as well as a changing environment in a frequent manner. It is a clear trading methodology that always exploits high probabilities. When a Fx trader is educated, he no longer takes a shot gun approach to the market. He takes a much focused "rifle and target" approach.Is Forex trading capital intensive? Back to Forex Faqs No. Forex trading is not capitally intensive. We require a minimum deposit of just $2500 for opening a regular forex trading account, and only $300 for opening a forex mini account and he enables forex currency trading to be performed on a highly leveraged basis. You are proficient to pick the degree of leverage or gearing that you wish to employ in foreign exchange trading.How does the Margin Call work? Back to Forex Faqs A margin call will get created only if the equity balance in your account falls below the marginal requirement. In the event that an account exceeds its maximum allowable leverage, ALL open positions will be settled down instantly without any delay, regardless of the size or the nature of positions held within the particular account.How long are positions maintained? Back to Forex Faqs As a general rule, a position is kept open for everyone in anticipation of one of the following occurs: 1) realization of sufficient profits from a position; 2) the specified stop-loss is triggered; 3) another position that has a better potential appears and you need these funds.How are currency prices determined? Back to Forex Faqs Currency prices are affected by an assortment of economical and political conditions, but probably the most vital one are the interest rates, inflation and political stability. At times, governments take part in the Forex market for influencing the value of their currencies, either by flooding the market with their domestic currency in an effort to lower the price, or conversely buying in order to raise the price in fact. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can also create high volatility in currency prices easily.What do emotions have to do with it? Back to Forex Faqs Where money is implicated so are emotions. Lots of people are quite knowledgeable while considering forex trading but unable to handle the emotions. Your emotions will be your biggest obstacle for winning the forex trading process. Not only the methods. But you cannot trade emotionally for being a successful forex trader. You must trade logically. Our egos drive us to be successful 100% of the time, but in reality no one is successful 100% of the time. Not even the professionals who come under this category. But successful professional traders clearly understand the Fx market is about logic, not emotions. They trade only logically and not emotionally.When is the FX market open for trading? Back to Forex Faqs Forex is a true 24-hour market and Fx trading begins each and every day in Sydney, and then moves around the globe as the business day begins in each financial center- first to Tokyo, then London, and finally New York. Investors can also react to currency fluctuations easily that has been occurred by economic, social, and political events at the time they occur day or night whatever it might be but not like other financial markets.How does margin work in the FX market? Back to Forex Faqs While trades are made in increments of at least 10,000 units of currency, forex traders do not need to have such a large amount in their account. Instead, they can trade using margin, which allows them to essentially borrow the rest. For each lot (term used for increment of 10,000 units of currency), clients must maintain $100 in the account for each lot of currency being traded (approximately 100:1 leverage). Once the account value falls below $100 per lot, all positions are closed. This ensures that forex traders can use margin without being liable for more than they depositWhat kind of trading strategy should I use? Back to Forex Faqs Currency traders make decisions using both technical factors as well as economic fundamentals. Technical traders use forex charts, trend lines, support and resistance levels, together with lot of patterns and mathematical analyses to spot out trading opportunities, whereas fundamentalists envisage price movements by inferring a huge multiplicity of economic information such as news, government-issued indicators and reports, and even rumors too. The most dramatic price movements also occur when unexpected events happening. The event can also range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war.How is money made on trading currencies? Back to Forex Faqs Currencies are traded on a point or else on a pip system. A pip is an alternate word for a point in the currency trading arena. Fx traders always try for capturing points. Every point is worth a different amount based upon the currency. If you trade 1 lot and incarcerate 40 points, you just made $400 and suppose if you trade 10 lots and capture 40 points, you just made $4,000.00, etc.Who are the participants in the FX Market? Back to Forex Faqs The motive that the Forex market is referred to as an 'Interbank' market is due to the fact that historically it has been subjugated by banks, including central banks, commercial banks, and investment banks too. However, the percentage of other market participants is also growing in a good manner. It includes organizations such as large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.Am I buying actual currencies when I trade? Back to Forex Faqs No. You are not buying actual currencies while trading. With the help of your forex margin account, you are only buying the right to trade one "lot" of a currency and depending on the currency being traded verses the US dollar, each lot equals a different amount of currency.Why is leverage important in the FX market? Back to Forex Faqs Leverage is a means of enhancing returns or value without increasing the investment size. Leverage allows you to magnify your potential returns by trading more than you actually deposit. For instance, with most FX brokers, traders can utilize up to 100:1 leverage -- meaning they can trade 100 times the amount they deposit -- without being liable for more then their deposit. Therefore, with a $100 margin deposit you can take a 10,000 base currency position in the market. In the event the total value of the account falls below margin requirements, your forex broker would probably automatically close all open positions. This prevents clients' accounts from falling below the actual available equity. Bear in mind, though, that leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gainsWhy don't we hear more about the FOREX? Back to Forex Faqs Reliable sources point out that only about 1.5 trillion dollars of currency is traded daily on the FOREX. Historically greater part of the volume is engendered by major investors, banks, financial institutions together with the governments. Thanks to the Internet, lots of people like us are beginning to be trained with the opportunities and are getting caught up easily.Forex Faqs Forex Faqs1