5 Common Questions About Forex Answered

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Q: How is the forex market different from the other markets?

A: Unlike the other markets, the forex market does not operate on an exchange. It is also not regulated by any central governing body. It is also the most liquid market with most transactions occurring on credit terms.

It is the only market that allows you to short the pair whenever you like with no limitations or penalties or costs involved.

It is a highly transparent and no party is able to control or manipulate the market.

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Q: How do brokers earn if there is no trading costs

A: The brokers still earn a fee, but that comes from the bid / ask spread from the trade that you enter into.

Q: What are you really buying or selling in the forex market?

A: To be honest, you are actually trading nothing. The Forex market is a purely speculative market. No physical exchange of currencies actually takes place. All trades basically exist as computer entries and are netted out based on market rate in your account. The profits and losses are then calculated in your account currency and recorded into your account.

Q: What is the equivalent of a tick in stock prices in terms of currency prices

A: the minimum move is a Pip, which represents a percentage in point. It is quoted to the fourth decimal point. There is also a pipette which is 1/10 of a pip as some brokers show prices up to five decimal points

Q: Which currencies are traded in the forex market

A: Although some retail traders choose to trade the more exotic currencies such as the thai baht or the Swedish krona, The vast majority of trades are in the 8 major currencies. These currencies are as follows. EUR, USD, GBP, AUD, CHF, CAD, NZD and JPY