Here are some of the most frequently asked Forex trading questions and their answers!

What is Forex?

Forex is short for foreign exchange which is the simultaneous buying and selling of two currencies.

What is Over The Counter OTC trading?

OTC trading is when transactions are conducted between two parties over the telephone or via and electronic network. The Forex market is considered to be and Over the Counter market.

Is Forex risky?

Yes it can be, the currency markets can be extremely volatile. Never invest more than you can afford to lose and make sure you do your research thoroughly. Don‘t even use your own money until you really know what you are doing – stick to demo accounts!

What are the costs involved in Forex trading?

You will need cash as collateral for your trading account, and your trades may also be subject to fees and commission which vary by broker.

What Is Margin?

Margin is the collateral you will require to deposit in order to take a Forex trading position.

What is a long position?

This is when a trader tries to benefit from a rising market by purchasing at one price and then selling later at a higher price.

What does Pip mean?

Pip is an abbreviation for “percentage in point” and it is the tiniest increment by which a Forex cross price can change.

What is a currency pair?

On the Forex market, currencies are always traded in pairs. A currency pair is a type of Forex instrument, such as USDJPY.

Where is the Forex market based?

Forex Trading is not centralized on an exchange, as with the stock and futures markets because it is a completely global market. There are centres in Sydney, Tokyo, London, Frankfurt and New York.

Who are the participants in the Forex Market?

Banks, brokers, traders and corporations all participate in the Forex market.

What are the most commonly traded currencies in the Forex markets?

The most commonly traded currencies in the Forex markets are EUR/USD, USD/JPY and GBP/USD.

What are the benefits of Forex compared to stock markets?

There are many benefits and some disadvantages to trading on Forex compared with stock markets. Forex is far less complex in that there are just a few currency pairs that are commonly traded and the market is open 24 hours a day as business hours move around the globe.

How do I know which currency will go up or down?

You cannot know, the volatility of the international currency market makes it very difficult to predict. There are analysis tools available which will utilize fundamental and technical analysis to make market predictions based on various factors.

What are Day Trading Deals?

These are trades which are opened and closed during the same day, although it is possible for a day trading deal to last longer than a day.

What is a stop loss order?

A stop loss order makes sure that a position is automatically exited at a given price so that potential losses can be limited in the event of the market moving against the trader.

What is the spread?

The spread is the difference between the Bid price at which you can sell and the Ask price at which you can buy the trading instrument.

Hopefully these FAQs will answer some of your most commonly asked Forex questions?