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Forex FAQ's

  • Frequently Asked Questions:

    1. How can I start trading Forex?
    You'll need to register a trading account with a Forex broker, such as FXPRO. Then you can begin using their Forex client program to buy and sell currencies. This will take less than 5 minutes of your time! 

    2. Who owns Forex and where is it located? 
    It's not owned by anyone in particular. Forex is an Interbank market, meaning that it's transactions are conducted only between two participants - seller and the buyer. So as long as existing banking system will exist, Forex will be here. It's not connected to any specific country or government organization

    3. What the working hours of Forex market? 
    Forex market is open from 22:00 GMT Sunday (opening of Australia trading session) till 22:00 GMT Friday (closing of USA trading session).

    4. What is Long/Short
    First, you should determine whether you want to buy or sell.
    If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: long = buy. 

    If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = sell.

    5. What is Bid/Ask Spread
    All Forex quotes include a two-way price, the bid and ask. The bid is always lower than the ask price.
    The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price at which you (as the trader) will sell.
    The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price at which you will buy.
    The difference between the bid and the ask price is popularly known as the spread.

    6. What is a Pip 
    The smallest price increment a currency can make. Also known as points. For example, 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.

    7. What is a Pip Value 
    The value of a pip. Pip value can be either fixed or variable depending on the currency pair. e.g. The pip value for EUR/USD is always $10 for standard lots, $1 for mini-lots and $0.10 for micro lots.

    8. What is a Lot 
    The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, 10,000 units if it's a mini, or 1,000 units if it's a micro. Some dealers offer the ability to trade in any unit size, down to as little as 1 unit.

    9. What is a Standard Account 
    Trading with standard lot sizes, generally 100,000 units of the base currency. e.g. The pip value  is $10 for EUR/USD.

    10. What is a Mini Account 
    Trading with mini lot sizes, generally 10,000 units of the base currency. e.g. The pip value is $1 for EUR/USD.

    11. What is a Micro Account 
    Trading with micro lot sizes, generally 1,000 units of the base currency. e.g. The pip value  is $0.10 for EUR/USD.

    12. What is Margin
    Margin is money you need to have in your broker account to secure your open position. Different brokers require different amount of margin money to keep your positions open.
    The deposit required to open or maintain a position. Margin can be either "free" or "used". Used margin is that amount which is being used to maintain an open position, whereas free margin is the amount available to open new positions. With a $1,000 margin balance in your account and a 1% margin requirement to open a position, you can buy or sell a position worth up to a notional $100,000. This allows a trader to leverage his account by up to 100 times or a leverage ratio of 100:1. If a trader's account falls below the minimum amount required to maintain an open position, he will receive a "margin call" requiring him to either add more money into his or her account or to close the open position. Most brokers will automatically close a trade when the margin balance falls below the amount required to keep it open. The amount required to maintain an open position is dependent on the broker and could be 50% of the original margin required to open the trade.

    13. What is Leverage 
    Leverage is the ability to gear your account into a position greater than your total account margin. For instance, if a trader has $1,000 of margin in his account and he opens a $100,000 position, he leverages his account by 100 times, or 100:1. If he opens a $200,000 position with $1,000 of margin in his account, his leverage is 200 times, or 200:1. Increasing your leverage magnifies both gains and losses.
    To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. For example, if you have $10,000 of margin in your account and you open one standard lot of USD/JPY (100,000 units of the base currency) for $100,000, your leverage ratio is 10:1 ($100,000 / $10,000). If you open one standard lot of EUR/USD for $150,000 (100,000 x EURUSD 1.5000) your leverage ratio is 15:1 ($150,000 / $10,000)..

    14. Support 
    Support is a technical price level where buyers outweigh sellers, causing prices to bounce off a temporary price floor.

    15. Resistance 
    Resistance is a technical price level where sellers outweigh buyers, causing prices to bounce off a temporary price ceiling.

    16. What is the best Forex trading strategy? 
    There is none. You should constantly develop your own strategies for every possible market situation, if you want to be in profit. Specific strategies can only be good for a certain period of time and for certain currency pairs.

    17. How much money I need to start trading Forex? 
    With forex you can start trading Forex with as little as $1. Usually, the minimum amount varies from $100 to $10,000 ($100,000 and more for Interbank trading). 

    18. How can I send my margin money? 
    If you have a Credit Card or an International Debit Card as given by HDFC Bank, ICICI Bank or Corporation Bank, you can send margin money in USD instantly. Indian Rupees will be automatically converted to USD.

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