Forex Basics

2011-03-01T16:15:00.002+02:00

1. What is Forex trading?
The foreign exchange market, also known as Forex, or FX, is the world's largest
financial market with over three trillion Dollars traded every day. The Forex market
is based on the trade of the world's currencies.

2. How does Forex trading work?
Forex trading is conducted in pairs. The trader always trades one currency against
another. Some examples of the major pairs include the EUR/USD, USD/JPY,
EUR/JPY, GBP/CHF, and CAD/USD among others. When you open a Forex trade,
you go “long” on one currency and go “short” on the other. The Forex market does
not have a centralized location and is therefore a very flexible trading option for people
around the globe.

3. Is Forex trading risky?
In one word, yes. However, there are various tools and techniques one can use to
reduce the risk. These include market analysis (technical or fundamental), trading
systems, signal providers, and Forex robots. However, the best way to avoid high
risks in Forex is to educate yourself about the Forex market before trading real money.
Additionally, experts recommended you use a demo account for an extended period of
time before risking money.

4. When is the Forex market open?
The Forex market has the most flexible hours with true 24 hour trading. The Forex day
starts in Sydney and moves around the globe first to Tokyo, then London, then NY.

5. How does Forex trading compare to stocks or mutual funds?
Forex and stocks have a lot in common but generally speaking, Forex is shorter term
trades than other markets. Most Forex traders do not leave positions open overnight,
which involves a fee called a “Rollover Fee”. In addition, the stock market is significantly
smaller than the Forex market making it a more difficult trade to master.

6. How long are Forex positions maintained?
This very much depends on the preferences of the trader but statistics show that over 80%
of Forex trades last for seven days or less and over 40% for two days or less. Generally
speaking, Forex traders close their positions when they have achieved their profit goals
for that trade, the Stop Loss is triggered as a result of reaching a maximum level of loss,
or a new position has become available and the trader wants to reallocate the funds.

7. How often are Forex trades made?
Since most brokers do not charge commission on opening a new position and the Forex
market is open almost around the clock, most trades open multiple positions throughout
the day. According to recent studies, the average Forex trader opens approximately ten
to twenty new positions every day.

FOREX ANALYSIS

Forex Basics