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GENERAL FOREX QUESTIONS

 

 

What is Foreign Exchange/Forex/FX?

Foreign exchange is the purchase of a country’s currency and the simultaneous sale of another country’s legal tender.  The foreign exchange market, also referred to as “Forex” or “FX”, is the largest in the world with a daily turnover of $1.5 trillion.

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What is a pip?

A pip is the fourth decimal place of a currency quote and represents one-hundredth of one percent. It is the smallest amount a currency price can fluctuate.    

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Is there a central location for the Forex market?

The Forex market is an over the counter (OTC) or “interbank” market, which operates 24 hours a day.  Therefore, there is no central exchange.

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Who participates in the Forex market?

Even though central and investment banks are still the central players in this market, there is a growing trend of hedge funds, money managers, and private investors participating in the market.

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What are the most traded currencies in the Forex market?

The most heavily traded currencies are the US dollar, British pound, Japanese yen, and Swiss franc, which accounts for approximately 80% all Forex transactions.

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How much risk capital is needed to get started?

Due to the degree of leverage used, only risk capital can be used to speculate in the Forex market.  However, cost is relatively small.  For a standard account, investors only need between $2,500.  For a mini account, investors can start trading with as low as $250.  For the professionally managed account program, the minimum requirement is $25,000.

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What is margin?

Margin is money held in your account as collateral for a position.  It allows traders to take on leveraged positions with a fraction of the equity necessary to fund the trade.  In the Forex market, leverage ranges from 1% to 2% of margin, giving investors the high leverage needed to trade actively, versus the usual 50% allowed in the equity market, giving the investor only double the buying power.

FX International Group’s trading platforms are configured to prevent you from trading once your account has reached its margin requirement level.  After reaching this level, all open positions will be closed to prevent you from incurring a negative account balance.

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What are "short" and "long" positions?

Short position is the sale of the base currency in anticipation of a downturn in price in order to benefit from the decline.  A long position entails the purchase of the base currency in expectation of a rise in that currency’s value.

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For more information regarding the foreign exchange market, please visit our Forex Learning Center.


 

      

      

      

 






 
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