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Forex Trading Questions

What is "forex trading"?

"Forex" or "FX," short for foreign exchange, is the largest financial market in the world. With trillions of dollars of trading volume a day, the forex market is bigger than all stock markets combined. Foreign currencies are on a floating exchange rate and are always traded in pairs (fore example, the U.S. Dollar against the Japanese Yen or the Euro against the U.S. Dollar. Forex trading involves the buying of one currency and the simultaneous sale of another. See our forex education section for more information.

Where is the forex market located?

The forex market is not centralized on an exchange, unlike the stock market or futures market. The FX market is an over-the-counter (OTC) market ("Interbank market") because currency transactions are conducted in electronic fashion (via computers and phones) between two parties.

Who are the participants in the forex market?

Since forex has been dominated by banks throughout history, the currency market is known as an "Interbank" market. Despite being dominated banks, there has been a rapid growth of other traders such as large multinational corporations, global portfolio managers, registered currency dealers, forex brokers, professional futures and options traders, and now, private speculators and investors like many of the clients of Forex Trading USA.

When does the FX trading market open and close?

The forex market is a 24-hour market, moving through financial centers in other parts of the world throughout the day. This includes Tokyo, London, and New York (the three leading centers) as well as well as other financial centers. Twenty-four-hour access means that forex traders can respond to currency fluctuations caused by global events around the clock. No other financial market provides this degree of flexibility.

What is "Margin" in currency trading?

Margin is collateral for a currency position. Our margin requirement is 1% for standard accounts. That means that with $1,000 a forex trader could trade $100,000. Fore mini accounts, the margin requirement is 0.5%; that means that the required deposit to trade a mini contract (which has a value of $10,000 - a tenth of a standard lot), is only $50. The amount of margin that forex traders could use is a lot greater than stock day traders have at their disposal. Increasing leverage increases risk.

Do you perform margin calls?

No, we do not perform margin calls.

What is a "pip"?

A "PIP" is the smallest increment that the price of a currency can move (last decimal place in a foreign exchange rate). It can be compared to the "tick" concept for stocks. "PIP" is an acronym for "price interest point." See our free forex education section for more information.

How can I get familiar with common trading terms such as "bid" and "ask"?

You have various options to learn about the common terms used in foreign exchange trading. First you can read through our free forex education section. You can also look through the forex glossary for definitions. Finally, you can become our customer and receive either our practical trading ebooks or our free, live FX training via the Internet.

What are the factors that affect the prices of currencies?

At any given time, the price of a currency pair will be determined by the relative supply and demand in the market. There are a variety of economic and political factors that can affect this. Interest rates, inflation and a country's political condition are some of the most important factors that can affect the demand and supply for a currency in the market. Furthermore, foreign governments can also intervene to affect the prices of their currencies. The way this works is that the country's Central Bank floods the market with a currency in an attempt to lower its price, or conversely, the buys the currency in order to raise its price. These factors, along with large market orders, can affect the prices of currencies. Despite this fact, the tremendous size of the forex market makes it very difficult for any one entity to control the price of a given currency for too long. Click here to sign up for a free 30-day forex demo.

What is a "Roll over" or "Tom Next"?

Tom Next stands for "Tomorrow Next Day." It describes the process of aligning the value dates of forex transactions and rolling a given spot position from one day into the next, while taking into account the respective interest rates of each currency in the currency pair being traded. This applies only to positions that are held past the close of the currency business day (5PM EST).

How do I limit the risk involved in trading currencies?

Using stop orders and limit orders while trading is the most common way to manage risk in FX trading. During the free training that we offer our customers, we go over how to do this in detail. Our mini account e-book also covers this in detail as well as our standard account e-book. You can also read the basics of setting stop and limit orders in our free forex education section.

What is the best strategy to trade currencies?

There is no "best" strategy in forex trading. There are many strategies that are used in the forex market. A trading strategy can use technical analysis, fundamental analysis, or a combination of the two. It is also important that the strategy contain specific money management principles to limit a trader's risk. I our free, live forex training, we go over specific strategies to trade currencies. You can also read some basic information in our forex education section. Our customers who cannot open an account with $50,000 or more to take advantage of our free, live training, can still receive one of our practical trading e-books. Those who open mini accounts with $250 or more, can request our mini forex e-book. Those who open standard accounts with at least $5,000, will receive our extremely practical forex trading ebook. These e-books provide tailor made, step-by-step strategies developed by our trading department.

How frequently do forex traders buy and sell?

There are different types of traders in the forex market. Some like to trade day trade currencies (like our forex robot), while others prefer a longer-term or swing trading (or "position trading") style. An active trader might trade over 10 times or more in a day.

How long should positions be held?

Depending on the trading strategy used by a trader, a currency position might be held for less than a minute or days. A forex day trader aims to buy and sell currencies multiple times in one day; sometimes within minutes. A swing trader is willing to hold a position for a day or more. Depending on the type of trading used, the profit targets and stop losses have to be adjusted accordingly.

How can I learn more about forex trading?

Forex Trading USA has an excellent free training program for our customers. Our free forex training is given live over the internet. Please note that live training is not available for demo accounts; only for accounts funded with US$50,000 or more. Customers that open accounts with less than $50,000 can request our exclusive forex trading ebooks. Traders can also read through our free forex education section to learn the basics of the forex market and trading. This section has a lot of free information. For hands on training, visitors can also sign up for a free 30-day trial of our forex trading software. For traders that want to trade hedge fund capital for a living, our proprietary trading program can help.

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