BabyPips Flashcards
What is the best session to trade?
London – New York Overlap
What are the best days of the week to trade forex?
Tuesday, Wednesday, Thursday
When two sessions are overlapping, is that a good time to trade forex?
yes
The middle of the week typically shows the ____ movement, as the pip range widens for most of the major currency pairs.
most
Is Sunday a good day to trade?
no
Are holidays a good time to trade?
no
Should you trade forex around major news events?
no
Should you trade forex during an episode of Game of Thrones, the NBA Finals, or the Superbowl.
no
Can’t seem to trade during the optimal sessions? Don’t fret. You can always be a swing or position ______.
trader
Currencies are always quoted in ____, such as GBP/USD or USD/JPY.
pairs
Which currency is listed first in the pair?
base
Where is the quote currency listed in the pair?
on the right side of the pair
The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency. In caveman talk, “buy ___, sell ___.”
EUR, USD
You would buy the pair if you believe the base currency will appreciate (gain value) relative to the _____ currency.
quote
You would ____ the pair if you think the base currency will depreciate (lose value) relative to the quote currency.
sell
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader’s talk, this is called “going long” or taking a “long position.” Just remember: long = ____.
buy
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called “going short” or taking a “short position”. Just remember: short = _____.
sell
All forex quotes are quoted with two prices: the bid and ___.
ask
For the most part, the bid is _____ than the ask price.
lower
The ___ is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market.
bid
The ___ is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market.
ask
Another word for the ask price is the _____ price.
offer
The difference between the bid and the ask price is popularly known as the ______.
SPREAD
What is the spread on the pair below?
2 pips
EUR/USD
In this example, the euro is the base currency and thus the “basis” for the buy/sell.
If you believe that the U.S. economy will continue to weaken, which is bad for the U.S. dollar, you would execute a ___ EUR/USD order.
By doing so, you ______ have euros in the expectation that they will rise versus the U.S. dollar.
BUY, bought
EUR/USD
If you believe that the U.S. economy is strong and the euro will weaken against the U.S. dollar you would execute a SELLEUR/USD order.
By doing so you have sold euros in the expectation that they will ____ versus the US dollar.
fall
Margin Trading
When you go to the grocery store and want to buy an egg, you can’t just buy a single egg; they come in dozens or “lots” of 12.
In forex, it would be just as foolish to buy or sell 1 euro, so they usually come in “____” of 1,000 units of currency (Micro), 10,000 units (Mini), or 100,000 units (Standard) depending on your broker and the type of account you have.
lots
How much is a mirco lot?
1,000 units of curreny
How big a lot is 1,000 units of currency?
a micro lot
How many units of currency is a micro lot?
10,000 units of currency
How many units of currency is a standard lot?
100,000 currency units
What are the three lot sizes from smallest to biggest?
micro lot = 1,000 units of currency
mini lot = 10,000 units of currency
standard lot = 100,000 units of currency
“But I don’t have enough money to buy 10,000 euros! Can I still trade?”
You can with _____ trading!
margin
Margin trading is simply the term used for trading with ________ capital.
borrowed
What’s even better is that, with the development of retail forex trading, there are some brokers who allow traders to have _______ lots.
custom
For positions open at your broker’s “cut-off time” (usually 5:00 pm EST), there is a daily ________ interest rate that a trader either pays or earns, depending on your established margin and position in the market.
rollover
If you do not want to earn or pay interest on your positions, simply make sure they are all closed before _____ EST, the established end of the market day.
5:00 pm
Since every currency trade involves borrowing one currency to buy another, interest ________ charges are part of forex trading.
rollover
Interest is ____ on the currency that is borrowed.
PAID
Interest is ________ on the currency that is bought.
EARNED
If you are buying a currency with a higher interest rate than the one you are borrowing, then the net interest rate differential will be positive (i.e. USD/JPY) and you will ____ funds as a result.
earn
True or false:
Retail brokers do adjust their rollover rates based on different factors (e.g., account leverage, interbank lending rates).
true
Don’t even think about trading until you are comfortable with ___ values and calculating profit and loss.
pip
The unit of measurement to express the change in value between two currencies is called a “___.”
pip
What is a pip?
The unit of measurement to express the change in value between two currencies.
If EUR/USD moves from 1.1050 to 1.1051, that .0001 USD rise in value is ONE ___.
PIP
A pip is usually the ____decimal place of a quotation.
last
Most pairs go out to _ decimal places, but there are some exceptions like Japanese Yen pairs (they go out to two decimal places).
4
How many decimal places does the Japanese yen quote go to?
two (2)
There are brokers that quote currency pairs beyond the standard “4 and 2” decimal places to “_ and _” decimal places.
5, 3
What are the 5 and 3 decimal place quotes called?
fractional pips
What’s a slang word for fractional pips?
pipettes
What does this calculation do for you?
Multiply/divide the “found pip value” by the exchange rate of your account currency and the currency in question.
Puts the pip value in your account currency.
Do you need to know how to calculate pip values?
No, your broker does it or you can use a pip value calculator.
How many currency units is a nano lot?
100
The change in currency value relative to another is measured in “pips,” which is a very, very small percentage of a unit of currency’s _____.
value
To take advantage of this minute change in value (pips), you need to trade large amounts of a particular ________ in order to see any significant profit or loss.
currency
When you ___ a currency, you will use the offer or ASK price.
buy
When you buy a currency, you will use the offer or___ price.
ASK
When you sell, you will use the ___ price.
BID
The _____ most frequently traded currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD) are called the major currencies or the “______.” These are the most liquid and the most sexy.
eight
majors
The ____ currency is the first currency in any currency pair.
The currency quote shows how much the base currency is worth as measured against the ______ currency.
base
second
The _____ currency is the second currency in any currency pair. This is frequently called the pip currency and any unrealized profit or loss is expressed in this currency.
quote
A ___ is the smallest unit of price for any currency.
pip
Nearly all currency pairs consist of _____ significant digits and most pairs have the decimal point immediately after the first digit, that is, EUR/USD equals 1.2538.
five
What is a pipette?
One-tenth of a pip. Some brokers quote fractional pips, or pipettes, for added precision in quoting rates.
What is the bid price?
The bid is the price at which the market is prepared to buy a specific currency pair in the forex market. At this price, the trader can sell the base currency. It is shown on the left side of the quotation.
The __________ is the price at which the market is prepared to sell a specific currency pair in the forex market.
ask/offer
Are ask price and offer price the same thing?
yes
What is the Bid-Ask spread?
The difference between the bid and ask price.
What is this?
Base currency / Quote currency = Bid / Ask
It’s how exchange rates in the forex market are expressed.
It’s also known as the Quote Convention.
The critical characteristic of the bid/ask spread is that it is also the transaction ____ for a round-turn trade.
cost
What is a Round Turn Trade?
Round-turn means a buy (or sell) trade and an offsetting sell (or buy) trade of the same size in the same currency pair.
What is a Cross Currency?
A cross currency is any pair in which neither currency is the U.S. dollar.
Is Margin like a security deposit for a given trade?
yes
What does this decribe?
The ratio of the amount capital used in a transaction to the required security deposit (margin).
leverage
The term “_____” refers to how you will enter or exit a trade.
order
True or false:
Different brokers accept different types of forex orders.
true
