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Questions & Answers for Beginners

If you have questions, we have answers. You are welcome to contact us directly for any particular answers you might need, but for more common questions, keep reading…

A: Unlike other markets, like futures or options, forex trading does not take place on a single, physical exchange. It is not overseen by central bodies with no arbitration panel or clearing houses. Members trade with one another based on credit. This market takes place entirely online. Moreover, it is the most liquid and fluid market you will find. You can make trades 24 hours per day, five days per week. The size and scope of this market is what makes it the most accessible in the world.

A: Investors who trade stocks typically use a broker, the person who acts as an agent on their behalf. That broker handles the exchange and gets a commission for doing so. The Forex market does not have that commission. Forex firms are dealers. They are not brokers. That means they assume the risk and do not charge a commission. Every penny earned is pure profit.

A: In short, nothing. This is a speculative market with no physical exchange of currency. All of the trades take place as a computer entry based on market price. The main reason for the Forex market is to facilitate the exchange of currencies from one type to another. These currencies need to be traded at all times.

A: The market starts each day in Sydney, but is open 24 hours. You can literally trade all day, every day, as the market moves around the world.

A: No. Most of the time, you can execute trades up to 100:1 leverage. This means you can use an initial $1,000 to make trades of $100,000. Remember that this leverage can let you maximize your profits, but the potential for losses is also maximized. A pragmatic approach would be somewhere around 20:1, but this is really based on how much you can afford to lose.

A: That’s what we are here for! We are an independent company, we are not forex brokers, but we collectively have enough experience in forex to help teach (forex academy), direct and answer any questions new forex investors might have.

A: There are many currencies offered on the Forex market. First, there are the four “majors” which refer to the Euro/Dollar, the Dollar/Yen, the Dollar/Swiss Franc, and the British Pound/Dollar. Next there are three popular commodity pairs: Dollar/Canadian Dollar, Dollar/New Zealand Dollar, and Dollar/Australian Dollar. Now, there are many other combinations to be had, but these might not be as popular. Some places let you trade exotic currencies like the Czech Koruna or cryptocurrencies like Bitcoin.

A: Carry is the most popular Forex trade you will find, something that is used by individual investors and big time hedge funds alike. It basically uses the idea that every currency is associated with an interest rate. Short term, these interest rates are set by the central banks in each country respectively. So, as a trader, you finance a purchase with a currency that has a low interest rate. Then you can get a higher return when the rate changes.

A: When trading, a long position is one where you buy a currency at one price and try to sell it later at a higher price. You would benefit from a rising market in this case. A short position is one where you sell a currency hoping it will depreciate. For this, you would benefit from a declining market.

A: You have probably read the acronym “pip” here and there. It stands for “percentage in point”. It refers to the smallest type of trade you can make. The prices are quoted on the Forex market down to the fourth decimal point. A change in the fourth decimal is called 1 pip and often equals 1/100th of one percent.

A: You are in the right place. Knowing not only the answers to these questions, but the basic jargon will help you to better understand the market and make wiser trades. Moreover, there are many educational resources out there which explain the ins and outs of the market, the best times to trade, which currencies to trade, and more. The more you learn, the more you can improve your trades. You can use community forums to exchange ideas or ask questions of the pros. You can use tools like economic calendars and calculators while you trade. You can use resources online to understand the terminology, complex subjects, and the latest news.

The bottom line is that every investing market has its own jargon and its own strategies. You should get to know the ins and outs of any market you intend to use, including Forex.

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