forex introductory theory

Question 1

what is a broker?

Answer 1

works as an intermediary between you and the liquidity provider

Question 2

what do brokers use?

Answer 2

They use multiple banks for pricing, and they’ll offer you the best one

Question 3

what are the three types of currency pairs?

Answer 3

major pairs

minor pairs

exotic pairs

Question 4

major currency pair

Answer 4

they all contain the USD in them

They are the most traded pairs in the market.

(EUR/USD) (GBP/USD) (USD/JPY) (…)

Question 5

minor currency pairs

Answer 5

They are a fusion of 2 Major Pairs, called also crosses.

Example: EUR/USD + USD/JPY = EUR/JPY

(GBP/JPY) (EUR/JPY) (GBP/AUD) (…)

Question 6

exotic currency pairs

Answer 6

made up of one major currency with another currency of an emerging economy

Question 7

what is a Pip

Answer 7

A pip is the measure of the price movement of a currency pair

Question 8

if there are 5 decimals in a currency, where is the pip?

Answer 8

in the fourth decimal

Question 9

if there are 3 decimals in a currency, where is the pip?

Answer 9

In the second decimal

Question 10

what are lots

Answer 10

They are the number of currency units you are buying or selling

Question 11

how much is 1 lot or standard lot

Answer 11

100 000 Units of the currency

or

≈ 10$/pip

Question 12

how much is 0.1 lot or mini-lot

Answer 12

10 000 Units of the currency

or

≈ 1$/pip

Question 13

how much is 0.01 lot or micro-lot

Answer 13

1000 Units of the currency

or

≈ 0.10$/pip

Question 14

what is leverage

Answer 14

borrowing a certain amount of money from the broker so that you can open bigger positions in the market

Question 15

what does it mean when you buy a currency pair

Answer 15

it means that we are buying the base currency by selling the quote currency

ex: We are buying EUR/JPY, it means we are buying EUR and selling JPY

Question 16

what does it mean when you sell a currency pair

Answer 16

it means that we are selling the base currency by buying the quote currency.

ex: We are selling GBP/NZD, it means we are selling GBP and buying NZD

Question 17

what are limit orders?

Answer 17

A limit order is an order to buy or sell at a specified price

Question 18

when are limit orders most useful?

Answer 18

when you’re not in front of a screen

Question 19

what is buying at STOP

Answer 19

you wanna buy order at a higher price than the market current price

Question 20

what is selling at stop

Answer 20

you wanna sell at a lower price than the current market price

Question 21

what is buying at limit

Answer 21

you place your order at a price below the current market price

Question 22

what is selling at limit

Answer 22

you sell at a higher order price than the current market price

Question 23

what is the fundamental analysis

Answer 23

the study of the overall state of a certain economy

We also look at social and political news that could influence the currency

40%

Question 24

what is market sentiment

Answer 24

This is how financial institutions and retail traders position themselves in the market

Usually they are going to be against each other

25%

Question 25

what is price action

Answer 25

Price action is a trading technique

allows you to understand where the price wants to go by studying the candlesticks

10%

Question 26

whats technical analysis

Answer 26

Technical Analysis is finding:

the best price to enter the trade

to execute your fundamental idea

to optimize your trade

Always the last step

25%