FOREX FAQ
What is Forex?
It is actually the Foreign Exchange market, where the various currencies used in the world are traded.
Traded, how?
Just as you would go to the bank and exchange U.S. currency for Euros if you were traveling to Europe, so too are they traded in pairs, USD/Euro in that example. The Forex market is basically a 24-hour market that operates electronically. You see, for example, it starts in Sydney, Australia, then to Tokyo, Japan, to London, Great Britain and then to New York, USA!
Are there major currencies that are being traded?
Yes, for instance the United States dollar, Japanese yens, Australian dollars, British pounds, Euro dollars, Swiss francs, and Canadian dollars. All of those can be traded one for another.
Aren’t there risks?
Yes of course, as there are in any investment, there are risks. However to reduce the risks, that’s why you learn all about Forex through free demo accounts. Once you learn about it you’ll learn how to control and manage your account properly. Pivot points, graphs and charts will be explained to you, as well as stop-loss order prices. You should show profits for at least 3 consecutive months prior to using real money.
What terms should I know?
There are many terms used in Forex, such as bid, which is the price that investors are willing to pay for a pair of currencies. Then there are Pips/points, which refer the fourth decimal point difference between a bid and offered. As an example the EUR/USD might be bid at 1.1911 and offered at 1.1915, thus the spread is 4 pips wide. In the example, the term quote currency means that the Euro dollar is the base currency, and the US dollar is the quote currency. Because dealing in Forex is speculative, meaning that no currencies actually exchange hands, there is a term used to denote the settlement date has been put off, and that’s called a rollover. You should also know that a “lot” refers to the 100,000 of the base currency, and that there are mini lots, as well as micro lots. As you study the terms you will find that you need to understand margin, leverage, slippage, drawdown as well as long and short positions.
Mutual funds and stock trading is similar then?
Actually not at all, because mutual funds and stock trading goes on for years, whereas Forex exchange values buy and sell almost instantaneously. This affords an almost on the spot profit or loss, when played correctly. It’s very exciting, and it can be watched instant by instant on the Internet through various programs that allow you to use your trading skills that you learned in the free demo accounts that were provided to you. These are very readily available.
What else can guide me?
There are various broker indexes, Forex daily news, press releases, various promotions, and indicia forecasts of all kinds, educational courses, and actual classroom courses being run all the time. There is a tremendous amount of knowledge being passed around, and all you need to do is avail yourself of it. Also, you will be using a Web trading platform to begin with until you know what kind of trading software you’d prefer.
Who are the major players?
You will need to realize that you are a small fish in a big pond, but remember that even small fish get to eat and swim just like the big fish and what happens is that they get bigger. Granted, you will never compete with Deutsche Bank, Merrill Lynch, and Morgan Stanley, but that’s not the point, you will be in the same pond with just as much chance of making it big as they do!
Why do Forex brokers want to help me?
It would make more sense to most people if the brokers wanted to keep how to deal in Forex to themselves, but what most people do not realize is that unless they make money for you, they have to cover the losses that are over what you have in your account. This alone makes them wish for you to make as much money as possible at all times!
