Trading

What is Forex?
Foreign Exchange is the act of buying one currency while selling another at an agreed exchange price. Forex is the world’s most traded market.
What can I trade?
One can trade any kind of asset such as currencies, commodities, indices and stocks.
Am I buying actual currencies when I trade?
No, traders aren’t actually buying actual hard assets. Traders are taking advantage of the volatility of exchange rates between two currencies and fluctuating rates.
How is currency traded?
Currencies are traded through a broker or dealer, and are traded in pairs; for example the euro and the U.S. dollar (EUR/USD). Ultimate goal is to profit from the rise in one currency from the other.
What are Commodities?
Commodities can be Gold, Silver, Oil, Sugar, Coffee, Wheat, Platinum etc., based on price units (barrel of oil, ounce of gold, bushel of wheat, kilo of coffee).
How important is training?
Forex Markets can be very volatile and highly competitive and a bad trade can have disastrous effects on your balances. Training can help you understand how the process and market work and may prevent you from mistakes. Training is very important before start trading with live accounts in order to help you minimize many of the trading risks.
What are the trading hours for the forex market?
The market is open 24 hours a day, 5 days a week.
Who are the “participants” in this market?
The participants of this market are Governments and Central Banks, Commercial and Investment Banks, Other Financial Institutions, consumers and travelers, businesses, Investors and Speculators.
What is the difference between the operations on the real account from operation on the demo (training) account?
One difference which is the most fundamental is the point to change your thinking, attitude and motivation when you move from Demo account to Real Live Account. In Live Account you are trading with real capital and you must be responsible. Another difference is that, besides that real data comes into Demo account and everything works as real, Demo is still only a software and computer simulation with simulation characteristics. A Demo account cannot take into account detailed environment of real market conditions.
What is leverage and how does it work?
The leverage of your account is the multiplier of your purchasing power that determines the amount of margin required for every trade. For example, if you have leverage of 400:1, you can control a large position ($100,000) with a small amount of margin ($250).
What is a pip and what does it represent?
A “pip” is the smallest whole increment in any Forex pair. For pairs quoted in 5 decimal points, a pip increment is based on the fourth decimal. For pairs quoted in 3 decimal points, a pip increment is based on the second decimal.For example, a movement in EUR/USD from 1.30385 to 1.30395 is a 1 pip move. In USD/JPY, a movement from 79.293 to 79.283 is also a 1 pip move. The value of a pip is determined by the currency of your account and the pair you are trading.If the quote currency is the same as your account currency, then a 1 pip move equals 10 account currency units per 100,000 traded.
What is a lot?
A lot is a standard unit of measurement that equals 100,000 units worth of currency. Most brokers offer the ability to trade in Standard (100,000) lots, Mini (10,000) lots, and Micro (1,000) lots. For example, if you place a Standard lot trade, you are trading 100,000 worth of currency.
What is Derivatives?
A derivative is a financial contract which derives its value from the performance of another entity such as an asset, index, or interest rate, called the “underlying”. Examples of derivatives include futures, forwards, swaps and options. Investors sometimes purchase or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or decline. These techniques can be quite complicated and quite risky.
What is Rollover?
Where the settlement of a deal is carried forward to another value date based on the interest rate differential of the two currencies example: next day.
What does Over The Counter (OTC) mean?
Over-the-counter (OTC) or off-exchange trading is done directly between two parties, without any supervision of an exchange. It is contrasted with exchange trading, which occurs via stock exchanges. Generally speaking, the OTC market is a negotiated market conducted between brokers and dealers using telephone and computer networks. In an OTC trade, the price is not necessarily made public information.
What types of accounts are available for Forex trading?
The type of account that is right for you depends on a number of factors, including your tolerance for risk, the size of your initial investment and the amount of time you have to trade the forex market on a day-to-day basis. The standard trading account is the most common account. This account affords you access to standard lots of currency, each of which is worth $100,000. A mini trading account is just a trading account that allows forex traders to make trades using mini (smaller) lots. In most brokerage accounts, a mini lot is equivalent to $10,000, as opposed to a standard account, which trades lots 10-times that size. Managed trading accounts are forex accounts in which the capital belongs to the investor/trader, but the buy and sell decisions are made by professionals. Account managers handle these accounts just like stockbrokers handle managed stock accounts. No matter what account type you choose, you should always take a test drive first. Most brokers offer demo accounts and other platforms for traders to get familiar with before starting trading live.
What is arbitrage?
A risk-free type of trading where the same instrument is bought and sold simultaneously in two different markets in order to cash in on the difference in these markets.
What are the most common currency pairs traded in the forex market?
The most common currencies traded in the market are called “majors”. Most currencies are traded against the United States dollar (USD). USD is traded more than any other currency. The five currencies most traded next are: the euro (EUR); the Japanese yen (JPY); the British pound sterling (GBP); the Swiss franc (CHF), and the Australian dollar (AUD). Trades of the six major currencies total 90% of the market. The most common currency pair is EUR/USD.
How is spread calculated when trading in the forex market?
All forex quotes are quoted with two prices: the bid and ask. The bid is the price at which a broker is willing to buy the base currency. The ask is the price at which a broker will sell the base currency. The difference between the two is the spread.
What is hedging?
A hedging transaction is one whose main aim is to protect an asset or liability against a fluctuation in the foreign exchange rate rather than profit from the exchange rate fluctuations.
What is an Expert Advisor?
An Expert Advisor is a piece of software written specifically for specific 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.
What is scalping?
A trading strategy that attempts to make many profits on small price changes. Traders who implement this strategy will place anywhere from 10 to a couple hundred trades in a single day in the belief that small moves in stock price are easier to catch than large ones.
What is the difference between a cash account and a margin account?
Customers can pay for security trades in full with cash or in part, on margin. A customer who trades in a cash account must pay for the full purchase price of the security by the settlement date. Cash accounts are the most basic type of investment account. Just about anyone who is eligible to open an investment account can open a cash account. “Margin” refers to the minimum amount of cash or marginable securities that a customer must deposit to buy securities. These accounts allow the customer to borrow part of the security’s purchase price from a broker-dealer to pay for trades.
What do the terms bid/ask mean?
The bid is the price at which a broker is willing to buy the base currency. The ask is the price at which a broker will sell the base currency.
How risky the trading operations at the Forex currency market are?
Like any trading or investment transaction, there is a high level of financial risk in trading Forex. In particular, the increased amount of leverage offered in the Forex market means that a trader can lose all, or a large portion, of his trading capital if the market makes a significant move against the trader’s position. Successful traders are aware of this risk, and carefully plan their trades in order to minimize the risks to their trading capital. Even with implementing risk management tools, the risks of trading Forex remain substantial.
How do I manage risk?
The one rule you must hold above all else is to trade only using your risk capital. In other words, never trade more than you can afford to lose. Also, you must still exercise caution when selecting a new broker. When reviewing a forex broker, insist upon regulation. You should only trade with a broker that is a member in good standing with a recognized regulator.
What is margin?
Margin is the amount required to open a new position in an Investment firm. It is not a fee or a charge to your account. It is an amount set aside, from your free equity, for your new trade.
What is margin call?
A margin call is the automatic closing of a position.
What is Technical Analysis?
Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.
What is Fundamental Analysis?
Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock’s current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value.
What is The Most Important Rule of Investing?
When it comes to investing, there is one major rule that you should remember and avoid violating if you want to arrive at retirement with enough money to enjoy your golden years. What is this investing rule? Simple. Never invest money you can’t afford to lose.
What are the benefits of investing through mutual funds?
The primary advantage of a mutual fund is that you can invest your money without the time or the experience that are often needed to choose a sound investment.
What are the expenses involved in investing in a mutual fund scheme?
Costs are the biggest problem with mutual funds. These costs eat into your return, and they are the main reason why the majority of funds end up with sub-par performance.
What is Stock?
A type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders’ meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares.
How Do I Actually Make Money From Buying Stock?
A share in a corporation gives the owner of the stock a stake in the company and its profits. If a corporation has issued 100 stocks in total, then each stock represents a 1% ownership in the company.
Why Stocks Go Up and Down?
A stock’s price will rise and fall based on free market forces. For example, that prices rise and fall primarily because of changes in supply and demand.
What is a Stock Split?
A stock split is a decision by the company’s board of directors to increase the number of shares that are outstanding by issuing more shares to current shareholders. For example, in a 2-for-1 stock split, every shareholder with one stock is given an additional share. So, if a company had 10 million shares outstanding before the split, it will have 20 million shares outstanding after a 2-for-1 split.
What’s the difference between a market order and limit order? Is one better than the other?
Market Order is the order entered for a specific quantity of securities, at no specific price. A market order is entered at no specific price and is immediately matched with the existing opposite orders at BBO (best bits/offers). Market orders may be matched at more than one price, if the volume of the market order is bigger than the corresponding volume of the opposite order at BBO. On the other hand, Limit Order is the order entered at a specific price. This price is the highest price at which the investor is willing to buy or the lowest price at which the investor is willing to sell. Consequently, a limit order is traded at the specific price stated in the order or at any other better price. For limit buy orders, the best bid for the seller is the highest buy price and respectively for limit sell orders, the best offer for the buyer is the lowest sell price.
What is a Dividend?
It is the distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the amount each share receives. Dividends may be in the form of cash, stock or property. Most secure and stable companies offer dividends to their stockholders. Their share prices might not move much, but the dividend attempts to make up for this.
What is a commodity market?
A physical or virtual marketplace for buying, selling and trading raw or primary products.
How are futures prices determined?
The futures market is a centralized marketplace for buyers and sellers from around the world who meet and enter into futures contracts. Pricing can be based on an open cry system, or bids and offers can be matched electronically.
What are commodity futures?
Commodities futures are an agreement to buy or sell a commodity at a specific date in the future at a specific price.
What is a forward contract?
A forward contract is an agreement to buy or sell an asset at a certain future time for a certain price. It can be contrasted with a spot contract, which is an agreement to buy or sell an asset today. A forward contract is traded in the over-the-counter market, usually between two financial institutions or between a financial institution and one of its clients.
What is a futures contract?
A future contract is an agreement between two parties to buy or sell an asset at a certain time in the future for a certain price. Unlike forward contracts, futures contracts are normally traded on an exchange. To make trading possible, the exchange specifies certain standardized features of the contract. As the two parties to the contract do not necessarily know each other, the exchange also provides a mechanism that gives the two parties a guarantee that the contract will be honored.
What is bitcoin?
Bitcoin is a decentralized, anonymous, digital-only currency. When first introduced, you could buy over 1,000 bitcoins for $1. The value of one Bitcoin is now worth just over $600.
What is money laundering?
Money laundering is the generic term used to describe the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source.
How is money laundered?
The act of laundering is committed in circumstances where a person is engaged in an arrangement (i.e. by providing a service or product) and that arrangement involves the proceeds of crime. These arrangements include a wide variety of business relationships e.g. banking, fiduciary and investment management.
Why is money laundering illegal?
Money laundering requires an underlying, primary, profit-making crime (such as corruption, drug trafficking, market manipulation, fraud, tax evasion), along with the intent to conceal the proceeds of the crime or to further the criminal enterprise.
How does money laundering affect business?
Any money laundering activities generate financial flows that involve the diversion of resources away from economically- and socially-productive uses—and these diversions can have negative impacts on the financial sector and external stability of member states. They also have a corrosive, corrupting effect on society and the economic system as a whole.
How does terrorist financing by money laundering affects the economy?
Terrorism financing involves the raising and processing of funds to supply terrorists with resources to carry out their attacks. While the phenomena differ in many ways, they often exploit the same vulnerabilities in financial systems that allow for an inappropriate level of anonymity and non transparency in the execution of financial transactions. Money laundering and the financing of terrorism are financial crimes with major economic effects.
What is being done at global level to strengthen the fight against money laundering?
The IMF has been very active for over ten years in the fight against money laundering. AML controls, when effectively implemented, mitigate the adverse effects of criminal economic activity and promote integrity and stability in financial markets. The Financial Action Task Force on Money Laundering (FATF), a 36-member inter-governmental body established by the 1989 G-7 Summit in Paris, has primary responsibility for developing a worldwide standard for AML and CFT. It works in close cooperation with other key international organizations, including the IMF, the World Bank, the United Nations, and FATF-style regional bodies (FSRBs).
What is Multilateral Trading Facility (MTF)?
It means a multilateral system operated by an Investment Firm or market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments – in the system and in accordance with its nondiscretionary rules – in a way that results in a contract.
What is a Regulated Market?
It means the multilateral system managed or operated by a market operator and which brings together or facilitates the bringing together of multiple third-party buying or/and selling interests in financial instruments – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules or/and systems, and which is authorised and functions regularly in accordance with the provisions of respective legislation of member states that are enacted in compliance with Directive 2004/39/EC.
What is Financial Action Task Force (FATF)?
The Financial Action Task Force (FATF) is an inter-governmental body whose purpose is the development (by setting standards) and promotion of national and international policies (legal, regulatory and operational measures) to combat money laundering and terrorist financing and other related threats to the integrity of the international financial system. The FATF is therefore a “policy-making body” created in 1989 that works to generate the necessary political will to bring about legislative and regulatory reforms in these areas.The FATF has published 40 + 9 Recommendations in order to meet this objective. These Recommendations are recognised as the international standard for combating of money laundering and the financing of terrorism, which form the basis for a co-ordinated response to these threats to the integrity of the financial system and help ensure a level playing field.