Forex FAQs
Here are quick lists of Forex products.(NOTE: Links open in a new Tab/Window)
| Forex Courses List | Forex Robot List | Forex Broker (For Demo Account) |
| Forex Mentor | FAP Turbo | Easy Forex |
| Forex Bill Killer | Forex Megadroid | eToro |
| 5 Minutes Forex | Forex Bullet | ForexYard |
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Components Of A Forex Quote
A forex quote consists of many small parts. They present a lot of information that is meant to be read in fast glance. Learning to read this information quickly is one of the most basic forex skills there is. Some of these items will seem obvious, and some much less obvious.
What Is Currency Pair?
The currency pair should be the first thing you see when you read a forex quote. This lets you know which currency pair the quote represents. The currency on the left side of the slash is the quote currency, and the currency on the right side of the slash is the base currency.
In forex trading, all currencies are quotes in pairs. For example, in comparing the Euro Dollar(EUR) to the US Dollar(USD), you would quote the currency pair EUR/USD. When we render a forex quote for this pair, we are saying how many dollars each Euro is worth. If the quote is EUR/USD 1.31 that says 1 Euro is worth 1.31 US Dollars.What Is Quote Time?
The quote time tells you exactly what time it was that the quote was rendered. Quotes are updated every few seconds in most cases.
What Is Low Price?
The low price shows you the lowest price of the trading day.
What Is High Price?
The high price shows you the highest price of the trading day.
What Is A Pip?
PIP stands for Percentage In Point. It is equal to 1/100 of 1 percent, or .0001. In forex, currency prices are typically quoted to the fourth decimal. For example, if the EUR/USD pair moves from 1.3410 to 1.3420 it has moved by 10 pips. If the EUR/USD increases by 1 full cent in value (from 1.3410 to 1.3510), it has increased by 100 pips.
What Is The Pip Value?
The pip value is the value per pip if you open a one lot trade.
What Is The Bid Price?
The bid price is the price your trade will open at if you submit a buy or a long trade.
What Is The Ask Price?
The ask price is the price your trade will open at if you submit a sell or short trade.
What Are Pipettes?
Pipettes are fractional pips. Many brokers now quote pips fractionally. A pipette is equal to 1/10th of a pip.
What Lot Setting?
The lot setting is for one click trading. It shows you how many lots your order will have if you have one click trading enabled. One click trading allows you to set default parameters for your trades and subsequently open them with one click.
What The Spread?
The difference between the bid and ask price is called the spread. The spread is how forex brokers make money while avoiding charging a commission. Theoretically, one trader can put in a sell order on a currency pair and the forex broker can match that order up with an order placed at the same time by another trader to buy the same pair. The seller pays the asking price, and the bidder pays the bid price and the broker keeps the difference in the middle.
What Is The Rollover Quote?
Rollover the daily payment or charge of interest on a currency pair. Some currency pairs have an interest rate differential between the two currency pairs. In this specific case the rollover quote is showing what you would pay or receive if you held 10 microlots of this currency pair. If you were buying this pair you would be credited $1.11 per day for each 10 lots you held. If you were selling this pair, you would be charged $2.49 per day.
Types of Moving Averages
Moving averages are one of the most commonly used technical indicators in forex trading. The moving average helps traders to track the overall pricing trend of a currency. It is called a moving average because it incorporates the new pricing data as it develops.
SMA - Simple Moving Average
A simple moving average is the most basic style of moving average. It simply tracks price data as it occurs and gives you the average direction based on the time period you select.
WMA - Weighted Moving Average
A weighted moving average focuses on more recent price action. The moving average line will consider recent price movements to be more important than older price movements. This is also commonly referred to as an exponential moving average or EMA.
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General Forex Questions
Frequently Asked Questions in Forex trading and here are some answers.
What is Event Risk?
Event risk refers to the risk of the market moving due to an upcoming news release. Many traders prefer not to take positions ahead of important news releases due to the risk of not knowing the outcome.
What is scalping?
In forex trading, scalping is taking advantage of currency pair changes over a very short period of time. Traders that scalp usually use high leverage and aim for less than 10 pips within a few minutes. Scalping is generally considered to be a dangerous practice by professional traders and is officially frowned on by forex brokers.
What is Trend Lines?
A trendline is is line that follows the current trend in a currency pair. While the science of using trendlines is often not exact, it gives you an idea of the approximate future actions of a trending currency pair. Trendlines are a basic part of technical analysis.
What does it mean to "go short"?
When you "go short" you are simply placing a sell order on a currency pair. In forex trading all currency pairs have a base currency and a quote currency. The quote will usually look something like this: USD/JPY = 100.00. The USD is the base currency and the JPY is the quote currency. This quote shows a rate of $1 US Dollar being equal to 100 Japanese Yen. When you place a short trade on this currency pair, you are going short on the USD Dollar and simultaneously going long on the Japanese Yen. It sounds complicated, but you would make this trade if you believed that $1 was going to worth less than 100.00 Japanese Yen(i.e. $1 = 99.00JPY) Unlike the stock market, in forex trading going short is as simple as placing your order. There are no special rules or requirements for going short on a currency pair.
What does it mean to "go long"?
When you "go long" you are simply placing a buy order on a currency pair. In forex trading all currency pairs have a base currency and a quote currency. The quote will usually look something like this: USD/JPY = 100.00. The USD is the base currency and the JPY is the quote currency. This quote shows a rate of $1 US Dollar being equal to 100 Japanese Yen. When you place a long trade on this currency pair, you are going long on the USD Dollar and simultaneously going short on the Japanese Yen. It sounds complicated, but you would make this trade if you believed that $1 was going to become more valuable than 100.00 Japanese Yen(i.e. $1 = 101.00JPY)
What is MetaTrader?
MetaTrader is an independent trading platform that was developed for trading forex, options, and futures. MetaTrader is made by the MetaQuotes company and it was created in 2002. MetaTrader was one of the first truly programmable trading platforms that came complete with its own programming language.
MetaTrader is a software platform that is independent of the forex broker. The brokers that support using the metatrader platform do package their own versions, but the back end software is maintained by the MetaQuotes Software Corporation. The metatrader platform is most well known for it's diverse technical analysis ability and the ability to run Forex Robots and Expert Advisors.What is a stop loss?
A stop loss is an order that closes out your existing trade in order to limit losses. Stop losses are literally used to stop the loss of your trading capital. When your stop loss order is hit on a trade, the trade is closed at the current market value.
What is an Expert Advisor?
An Expert Advisor is a piece of software written specifically for the MetaTrader Platform. An Expert Advisor can just advise traders which trades to make or can be programmed to automatically execute the trades on a live account.
Expert Advisors are very flexible pieces of software that can take any information into account that is available on the metatrader platform. They are written in their own proprietary programming language called MetaQuotes Language Version 4.How much money do I need to get started?
The amount of money that you will need to open an account depends on the broker. Brokers such as Easy Forex will allow you to open an account with as little as $1 while brokers like FXCM require at least $300. If you aren’t ready to commit real money yet, you can always start with a demo account.
What is Drawdown?
Drawdown is the difference between the balance of your account, and net balance of your account. The net balance takes into account open trades that are currency in profit, or currently in loss. If your account net balance is lower than your account balance, this is called drawdown.
What is a technical indicator?
A technical indicator is a graphic representation of price action. Some technical indicators overlay on the trading chart, and some reside on the bottom of the chart.
Typically a technical indicator is just some type of oscillation of the price based on parameters that you set. Using technical indicators can help you to filter out some of the noise of the price movement on the chart and get an idea of the bigger picture. A few examples of technical indicators:
Moving Averages MACD - Moving Average Convergence/Divergence
RSI - Relative Strength Index
CCI - Commodity Channel Index
There are many different types of technical indicators. They are not the holy grail of forex trading, but they are good way to to get an alternate view of the price.When does the forex market open?
The forex market is open almost all of the time! It opens on Sunday night around 21:00 GMT and closes on Friday afternoon around 21:00 GMT. Forex traders can initiate trades at any time between Sunday and Friday.
What is backtesting?
Backtesting is the process of testing your trading system using past market data. For example, let's say you have a system that buys a currency after every two bullish candlesticks. You can look at past market data to see how that strategy would have worked in the past.
What is a forex robot?
A forex robot is a piece of software that automates trading decisions. The most popular robots for retail traders are built around the Metatrader platform. These robots run on metatrader as "expert advisers" and they can do anything from giving you a signal to place a trade, to placing and managing the trade for you automatically.
If you have a forex strategy that is strictly mechanical and doesn't require a human in the decision making process, you can program your own forex robot to trade for you 24 hours a day. Here are a few we recommend: FAP Turbo , Forex Megadroid or Forex Bullet
Is Forex Trading for Everyone?
Forex trading is something that everyone can do, if they are determined. That being said, forex trading is not for everyone. It takes a certain amount of persistance and the ability to adapt to changes easily. Here are a few things that would be helpful for someone that wants to trade forex.?
What is a mini lot?
A mini lot is a lot of 10,000 units of the base currency. It is called a mini lot because it is only 1/10th of the size of a 100,000 unit standard lot.
If you are trading on an account based in US Dollars, a mini lot would be a trade worth $10,000 of USD.What Does 'Buy the Rumor Sell the News' Mean?
Buy the rumor, sell the news is something that happens in most markets, particularly financial. Sometimes traders trade based on what they believe will happen in a given economic report or event (the rumor). Once the event passes or the report is released (the news), they dump their positions and the market moves.
Is forex trading or commodity trading better?
This is something that really boils down to a few factors such as what you feel comfortable with Some people like commodities because it is still a physical market. Many commodities can be seen in use in your daily life. Some traders feel like they have more of a connection because of that. In addition, the commodities markets are very regulated unlike the Forex market where there is very little government regulation. Lastly, there is more leverage in the forex market and you don't have to go through hoops to be able to have it. Just fund your account with a few hundred dollars to control thousands.
What is Carry Trading?
Carry trading is when you take advantage of the interest rate differential between two currencies. For example, if the interest rate on the British Pound(GBP) is 5.75% and the interest rate on the US Dollar(USD) is 4.25% and you place a buy trade on GBP/USD, you will collect the difference between the two interest rates or 1.50%. As long as you hold that trade open, you will be paid that interest differential every day.
What is the Interbank?
The Interbank is not really a center exchange where everything is traded. Interbank actually means "between one or more banks". As it applies to forex trading, the Interbank is like a backroom where there are groups of people making deals. The prices are all close to the same, but not exactly the same.
What is an interest rate differential?
An interest rate differential is the difference in interest rate between two currencies in a pair. If one currency has an interest rate of 3 percent an the other has an interest rate of 1 percent, it has a 2 percent interest rate differential.
If you were to buy the currency that pays 3 percent against the currency the pays 1 percent, you would be paid on the difference with daily interest payments.What is Risk Aversion?
Risk Aversion is when market participants are moving their money out of assets that are considered to be more risky and into assets that are considered to be a safe haven. When markets become risk averse volatility tends to spike to abnormal levels.
What is a trailing stop?
A trailing stop is a stop loss order that moves as the price progresses in the direction that you are trading. If the trade moves back towards the trailing stop loss order, the order will stay stationary until hit.
A trailing stop will continue to follow the price reducing your trading risk with every move and ultimately locking in profit.What is market noise?
Market noise is the seemingly mindless back and forth movement on the smaller time frames. A trader’s definition of market noise is usually relative to the time frames that they are trading. A trader that trades a 1 hour time frame might think that the 15 min chart contains market noise while a trader that trades 15 minute charts might think that a 5 minute chart contains market noise.
What is the US Dollar Index?
The US Dollar index was created to measure the value of the United States Dollar against a basket of foreign currencies.
The basket of currencies contains the Euro, Japanese Yen, Canadian Dollar, British Pound, Swedish Krona, and the Swiss Franc.What is a take profit order?
A take profit order is an order that closes your trade once it reaches a certain level of profit. When your take profit order is hit on a trade, the trade is closed at the current market value. Take profit orders are also sometimes referred to as limit orders.
When is the asian trading session for forex trading?
The Asian trading session starts around 7PM Eastern Time and ends around 4AM Eastern Time.
When is the US trading session for forex trading?
The US trading session starts around 7AM Eastern Time and ends around 4PM Eastern Time.
