4 Most asked Questions about Forex Currency trading Answered

1. In Forex Market which, currencies are traded?

Most commonly there are 7 main currencies in Foreign Exchange Market, whereas individual traders might also offer exotic or rare currencies as well. These major 7 currencies are most trusted and widely used around the globe, Mainly USD (Us Dollar), CAD (Canadian Dollar), GBP (British Pound), JPY( Japanese Yen), EUR (Euro), AUD (Australian Dollar), CHF(Swiss Franc) and NZD (New Zealand Dollar).

These currencies are divided into pairs, 4 major and 3 commodity groups.

4 Major Groups are : EUR/USD, USD/JPY, GBP/USD, USD/CHF

3 Commodity groups: AUD/USD, USD/CAD, NZD/USD Moreover, there are few variation pairs such as GBP/JPY and EUR/JPY. Together these currencies make up 95% of all Forex trades.

2. What is PIP?

If you have ever jargoned through a Forex Article, you might be familiar with PIP. Actually, pip means percentage in points. A pip is the smallest possible unit in Forex Market. In Forex Trading there are no decimal points, instead, they are converted into points. For example, $1.50 would be written as 15,000. A pip is a change in the fourth decimal point of a currency. Profits and loss in Forex markets are often measured in pips.

3. What are the differences between Forex and traditional markets?

Unlike traditional markets, in Forex nothing is actually exchanged. Forex is not regulated by any authority, there is no up limit to Forex. Meaning you can buy as much currency as you like. There is no central agency to control Forex exchanges. According to debt allowance of your Forex trader, you can trade a limited amount of money.

Unlike traditional practices, insider trading and many other practices are not illegal or punishable by law. If for some reason you knew that oil prices will decline next Monday and so will dollar, you can instantly spend all your dollars and buy any currency you like. And later convert them again for profit.
 Forex trading is open 24 hours a day till Sunday 5 pm EST and it can be easily accessed with a computer anywhere from the world with an internet connection.

4. How does the Forex work?

Exactly how Forex market works is still a mystery to many. Unlike traditional stock markets and currency exchange centers, you are not actually buying or selling anything. All your trades are simply few entries on a computer. Forex trading simply works on a computer algorithm, where base currency rates are entered and depending on trades, end prices are determined.

Forex Basically works as a modern version of IOUs. Multinational organizations which require a constant flow of foreign currency to carry their business all around the world, use Forex to trade their currencies. In Forex when you exchange one currency for another you are short on one and long on another. So let’s suppose you exchange 100$ for JPY, you will be short for Dollars and Long for JPYS. But instead of physically exchanging the currencies, Forex allows exchanging currencies in just a matter of computer entries.

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