Forex Trading: Questions About Currency Trading

Most Essential Currency Trading Questions Answered

Forex trading is now merely accessible to everyone. However, not every trader manages to get into the finish line profitably.

Some may have little knowledge of what exactly currency trading means or even how it’s done. A forex trading coach can assist greatly in your journey of trading-in fact; they make a tangible difference. Also, they can massively shorten the learning curve.

But do you have the right questions to ask? Here are some of the questions you can ask to take full advantage of a coach’s experience.

Why Forex Market – How Does it Compare to the Other Markets?

Currency trading takes some special place in the market. Unlike the stocks, futures, and other options, currency trading doesn’t operate on any regulated exchange. Moreover, it’s not controlled in any manner with a central governing body.

Another difference is that, with currency trading, trades are not guaranteed as there are no clearinghouses. Also, no arbitration panel for adjudicating disputes, trading is based mainly on credit agreements.

Currency trading is also more accessible with other benefits such as liquidity, leverage, low trading expenses, and global exposure. Besides, the market is the most liquid as well fluid one, and trades 24hrs a day and doesn’t (rarely) have gaps in price.

What’s a Pip?

Pip simply stands for Percentage In Point. In forex trading, a pip is basically the smallest increment. The currency in Forex is priced to the fourth decimal point, and the change in the fourth decimal point is the pip. Typically, 1 pip = 1/100 of 1%. Once you begin trading, it’ll be even easy to understand.

What is traded in the market?

At a glance, the retail forex market is merely all about being a speculative market. So, one can say at once that “nothing is traded.” One thing is that there’s no physical exchange of the currencies that takes place in the forex market- trades are all computer-based.

Currencies trade in pairs and when making a trade there’s always one long currency and then short the other. Basically, unlike the other markets, in currency trading, no physical exchange is involved, and transactions are computer entries.

What’s the Forex Commission?

Brokers are merely a normal case in other markets such as stocks, futures, and others. The broker poses like agents in transactions taking the order to the exchange and executes it according to the instructions of the customer. Later, a commission is provided to the broker by the customer.

However, in forex markets, there’re no commissions. Besides, brokers are dealers in the FX market, and they’re the ones who assume the risk serving as counterparties to an investor’s trade. Their money is generated via a bid-ask spread, and hence no commissions are offered.

What Currencies are traded in Forex?

In the forex market, most dealers trade in seven liquid currency pairs which are merely the four “major,” and they include;

  • USD/JPY (dollar/Japanese yen)
  • GBP/USD (British pound/dollar)
  • EUR/USD (euro/dollar)
  • USD/CHF (dollars/Swiss franc)

Furthermore, there’re three commodity pairs which include;

  • USD/CAD (dollar/Canadian dollar)
  • NZD/USD (New Zealand dollar/dollar)
  • AUD/USD (Australian dollar/dollar)

What’s a Currency Carry Trade?

The most popular trade in the forex market is the carry, and it’s practiced by the smallest retail speculators and the most significant hedge funds alike. Every currency across the globe has an associated interest, and that’s where carry trade is based.

With currency carry, the trader will go long on the currency that has a high-interest rate as well as finances that purchase with the currency with a low-interest rate.

Conclusion

Finally, it won’t be wrong to ask whether one can get rich in forex trading. Depending on the dedication and seriousness you put into your trading, getting rich is very much possible. However, you can’t estimate exactly how much one can earn on Forex trading.

Sometimes, the forex market can be very volatile; therefore, anything can as well happen while trading. Nevertheless, the market is now accessible more efficiently than ever before, thanks to the brokers. These questions will surely get you placed in a better position to pull your trigger into currency trading.