Forex Market FAQ
1. Is the forex market fair?
The gigantic size of the forex showcase implies it is considerably harder to control than different markets. Indeed, even national banks can’t totally control the market heading of any money. The market can react forcefully to national bank intercessions or monetary news, however significant controls are unrealistic, notwithstanding for huge players like banks.
2. Does the forex market have a central clearing house or central location?
No. Unlike the stock market, the forex market is not centralized. It’s an over-the-counter (OTC) market distributed all over the world, operating 24 hours a day, 5 days a week.
3. Who participates in forex trading?
Customarily, banks have been the key players on the forex advertise. Notwithstanding, because of open Internet exchanging, cooperation is expanding quickly among other market gatherings, establishments, and people. Multinational companies, mutual funds, global cash merchants, prospects and choices brokers, and private examiners all take part in forex hypothesis and supporting.
4. Which currencies are the most commonly traded?
The US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the Australian Dollar are the most commonly traded currencies, accounting for 85% of daily transactions on the forex market. The most commonly traded currency pair is the Euro and the US Dollar.
5. How do I trade forex over the Internet?
Executing trades is easy. Just download and install one of our trading platforms and log in to your account. Then:
Open a trade by clicking the “New Order” button in the Trading Terminal.
- Enter your selected trading volume.
- Click on the bid (sell) or offer (buy) button to execute the trade.
The platform will calculate your margin requirement and the deal will be instantly confirmed online, as long as your account contains sufficient funds. The open order will be displayed in your trading terminal and updated automatically as market conditions change.
Get a demo account first if this is something you haven’t tried before.
6. What's the spread and why is it important?
The spread is the contrast between the offering cost and the approaching cost for every money. In the event that you purchase at advertise you get the ask cost. On the off chance that you offer at advertise, you get the offer cost. “YO FX” has tight spreads (the separation between the offer/ask cost is little). This encourages you profit speedier in light of the fact that even an insignificant value development can bring about benefit. Our typical managing spreads are in the vicinity of 1 and 3 pips (value intrigue focuses – the littlest development a cash combine can make) for the significant money sets.
7. What's a swap rate and does it make or cost me money?
A forex swap rate is the interest calculated for all the positions you hold overnight, through “YO FX”‘s rollover period.
To determine the swap rate, the interest rate of each currency is calculated. If you’re long a currency, you receive that rate. If you’re short a currency, you pay that rate. Because there are two currencies in each currency pair, and you’re simultaneously long one and short the other, you’ll pay or receive the net difference.
Daily swap charges are posted by financial institutions and are subject to change based on market conditions. Each currency pair has its own rate and is measured on a standard size of 1 lot (100,000 base units).
For the latest Swap rates please see the “YO FX” MT4 Trading Platform. View the rates with the following simple steps:
- Select View > Market Watch
- Right-click on Market Watch and select Symbols
- Choose the currency pair you want and select Properties
8. What is margin and how do I calculate how much I need?
Margin is the amount of money your account must hold to open (and maintain) a trade. Margin is calculated based on the current price of your chosen currency pair, the size of the trade you want to make, and the leverage you selected when you opened your account.
The dealing software won’t allow you to open a position if you don’t have enough free margin available. Your free margin is indicated in the terminal of each of our trading platforms.
To calculate the margin requirement yourself, use: (Market Quote * Volume) / Leverage = $ Margin required.
For example, to open 1 standard lot (100,000 base currency) of EUR/USD at 1.2350 with a 1:200 leverage level = (1.2350 * 100,000) / 200 = $617.50. That’s the free margin you must have in your account to execute the trade.
9. Can I get a margin call if I have no free margin?
No. Your free edge can turn into a negative figure in light of the fact that your exchanges will remain open until the point that your accessible value level (demonstrated in the exchanging stage) tumbles to 20% or less of the expected edge to open those exchanges. In the case simply over, the exchange opened with an edge prerequisite of $121.75 would be liable to an edge call if the record value tumbles to $123.50 or less.
10. How do I make a profit in forex?
Similarly as with some other market, you profit by purchasing low and offering high. In case you’re short, you need to offer it high and cover the short low. Dissimilar to stocks, going long or short is similarly simple in forex, and the edge prerequisites are precisely the same.
For instance, envision you’re anticipating that the USD should ascend against the EUR (or the EUR to fall against the USD, which is a similar thing). To follow up on this expectation, you have a $5,000 account with 1:100 use (your purchasing power is along these lines $500,000).
You choose to offer 5 smaller than expected parcels (50,000 in base money at $5 per pip) of the EUR/USD combine at the market cost of 1.2350. To secure your capital, you have to choose a stop misfortune (we’ll utilize 5% of your record in this illustration). So you set your stop misfortune arrange at 1.2400 (50 pips or $250 hazard). Only 4 days after the fact the EUR/USD quote is 1.2200 and you choose to close your short position on the EUR.
Your benefit in pips is 1.2350 – 1.2200 = 150 pips. Since you exchanged 5 smaller than expected parcels at $5/pip esteem, you made a benefit of $750 on this exchange while gambling $250.
11. What does it mean have a 'long' or 'short' position?
You hold a long position when you are buying a currency, and a short position when you are selling. For example, using the most common pair, EUR/USD: if you’re buying the Euro, you’re long the Euro and short the US Dollar; and if you’re selling the Euro, you’re short the Euro and long the US Dollar. Since currencies are paired, you are simultaneously long one currency and short another.
12. What factors affect the price of currencies?
The expansion, political flimsiness, national bank intercessions, and other national and worldwide financial and political occasions are large factors that can influence cash costs.
Be that as it may, on account of the extent of the forex showcase, even the impact of national bank mediations is restricted. No single substance can drive the market for long, however, nations saw as having solid, developing economies will see their money esteem acknowledge, while nations with poor monetary standpoint will see the inverse.
13. What's the best way to manage risk when trading currencies?
In addition to managing the size of your trades, you can use limit orders and stop loss orders to minimize your risk. A limit order restricts the maximum price to be paid or the minimum price to be received, thus ensuring you get filled close to your target price. A stop loss order limits losses by setting a position for automatic liquidation.
14. What kind of trading strategy should I use?
Your exchanging technique is close to home. Notwithstanding, it is for the most part a smart thought to settle on choices consolidating both specialized and monetary components.
Specialized exchanging methodologies incorporate diagrams including oscillators, incline lines, bolster and protection levels, and different examples and scientific investigations.
Value developments can likewise be anticipated by deciphering news, government pointers and reports, and an assortment of unforeseen occasions including race comes about, rising financing costs, and catastrophic events.
15. I'm interested in forex trading. How can I learn more?
You can take forex trading courses online, but we think the best way to learn is through experience. A forex demo account allows you to learn how to trade in an authentic trading environment, without risking real financial losses. Open a standard demo account with “YO FX” here or by clicking on one of the “Open Demo Account” buttons anywhere on the site and filling out the registration form.