Forex Trading FAQ's

Posted by forex on August 23rd, 2010

What is the meaning of FOREX?

Forex is short form of ?FOREIGN EXCHANGE?.

What is Foreign Exchange?

The foreign exchange market is the largest market in terms of turnover. Forex trading is referred to as trading of currencies. Trading is always done in a pair of two different countries. One currency is sold to buy another currency. Currencies of United States (USD), Briton (GBP), Europe (Euro), Australia (AUD) are the most traded currencies in the forex market.

How the forex market is governed?

Forex market is a decentralized. There is no central authority to govern it. Forex market is over the counter market.  Transactions are between financial institutions. Like the stock markets there is no governing body which governs this market.

What are the timings of the Forex market?

There are no timings for the forex market. It is a 24-hour market. All over globe, one or the other part of the world, forex trading is going on at anytime. Except for the weekend it is open 24 hours.

Mostly which currencies are traded in the forex market?

Main currencies traded in the forex market are US Dollar, Japanese Yen, British Pound, Swiss Franc and Australian Dollar.

Who is dealing in the Forex Market?

The Forex market was historically dominated by banks, these includes commercial banks, central banks and investment banks. However these days other organization like forex dealers, international money brokers, global money managers and even individual traders are also involved.

What is the meaning of ?long? and short? position?

A long position means trader is buying currency and want to sell it at higher price later. A short position means trader is selling currency and wants to gain from the declining market.

How much minimum investment is required in the forex market?

This is limit as such. You can start trading with even $100.

What are the factors affecting exchange rates?

There are many factors which can affect currency price of a country. It can be large orders, political condition, inflation, interest rates. Sometimes even governments are involved into forex trading, to keep expected price of their currency.

What is ?overnight? and ?intraday? position?

Overnight positions are the positions which are open even after normal closing hours of the market. Broker is rolling over those positions to the next day. This is based on interest rates differentials of the currencies.

In the Intraday trading positions remains open till the end of the closing hours only.

What is Margin?

Margin is the sort of security provided by trader to the forex broker to cover up any losses made by him. It allows you to carry out trade of larger volume than the security amount provided by trader to the broker. However broker will ensure that trade is only allowed if there are sufficient funds provided by the trader cover up any losses smade by him.

What is the Bid/Ask Rate?

Bid price is the price what a forex dealer is offering price if you want to buy a currency. It is your buy price and sell price of a dealer. Ask Rate is buy rate of a forex dealer, if you want to sell particular currency, you will get that rate.

How can I minimize the risk in the forex trading?

Like any other market, forex market is also not risk free. You can use advanced techniques for trading. These techniques are used for minimizing the losses and increasing the chances of making profit. Forex scalping, Forex Hedging, forex position Trading are the advanced techniques used in the forex trading.