General Knowledge Of What Forex Is About Flashcards by Chidera Okechukwu

What is Forex?

The Forex or FX market refers to the global marketplace where banks, institutions, and individuals speculate on the exchange rate between fiat currencies.

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What is traded in Forex?

The simple answer is money. Specifically currencies.

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Define major currencies and list them.

Major currencies are currencies that are most heavily traded and represent some of the world’s largest economies. They are:

USD - United States Dollar
EUR - Eurozone
JPY - Japanese Yen
GBP - Great Britain Pound
CHF - Switzerland Franc
CAD - Canadian Dollar
AUD - Australian Dollar
NZD - New Zealand Dollar

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What is an exchange rate?

An exchange rate is simply the ratio of one currency valued against another currency.

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What are major currency pairs? List them.

Major currency pairs are pairs that contain the US dollar on one side and are the most frequently traded and liquid in the market.

EUR/USD
GBP/USD
AUD/USD
NZD/USD
USD/JPY
USD/CAD
USD/CHF

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What are the three categories of currency pairs?

The major currency pairs
The cross currency pairs
The exotic currency pairs

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What are cross currency pairs? List them

Cross currency pairs are pairs that include any two of the major currencies except the US dollar.

EUR/GBP (Euro/British Pound)
EUR/JPY (Euro/Japanese Yen)
EUR/AUD (Euro/Australian Dollar)
EUR/CAD (Euro/Canadian Dollar)
EUR/CHF (Euro/Swiss Franc)
GBP/JPY (British Pound/Japanese Yen)
GBP/AUD (British Pound/Australian Dollar)
GBP/CAD (British Pound/Canadian Dollar)
GBP/CHF (British Pound/Swiss Franc)
AUD/NZD (Australian Dollar/New Zealand Dollar)
AUD/JPY (Australian Dollar/Japanese Yen)
CAD/JPY (Canadian Dollar/Japanese Yen)
NZD/JPY (New Zealand Dollar/Japanese Yen)

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Define forex trading.

Forex trading can be defined as the process of speculating on currency prices to try and make a profit.

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Define forex trading.

Forex trading can be defined as the process of speculating on currency prices to try and make a profit.

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Why are currency pairs quoted in pairs?

The reason they are quoted in pairs is that in every foreign exchange transaction, you are simultaneously buying one currency and selling another.

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Why are currency pairs quoted in pairs?

The reason they are quoted in pairs is that in every foreign exchange transaction, you are simultaneously buying one currency and selling another.

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What is Base Currency?

A base currency is the first currency in a currency pair.

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What is a quote currency?

This is the second currency in a currency pair.

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What does the exchange rate tell you when buying?

When buying the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency.

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What does the exchange rate tell you when buying?

When buying the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency.

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What does the exchange rate tell you when selling?

When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency.

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What do traders mean when they say ‘long or short’ a particular currency.

Going long means to buy a currency pair while going short means to sell a currency pair.

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What is Bid?

The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency.

What is Bid?

The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency.

What is Ask?

The ask 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 can buy from the market.

What is Spread?

The spread is the difference between the bid and the ask price.

What is a Lot in forex and what are the different types of lot sizes in the forex market?

A lot is a unit of measuring a transaction amount.

Nano lot (100 units of currency)
Micro lot (1,000 units of currency)
Mini lot (10,000 units of currency)
Standard lot (100,000 units of currency)

What is Margin?

Margin is the money a trader deposits to their account to cover the credit risks.

What is Leverage?

Leverage is using borrowed money to make larger investments with less of your own money.

What is a Pip?

A pip is the smallest unit of price for any currency.

What is a Pip?

A pip is the smallest unit of price for any currency.

What are the types of Spread?

1. Fixed spreads: fixed spreads stay the same regardless of the market condition at any given time. 2. Variable spreads (aka Floating): variable (floating) spreads are spreads that the difference between the ask and bid prices are constantly changing.

What are the types of Spread?

Explain the order types in the forex market.

1. Market order: this is an order instantly executed against a price that your broker has provided. 2. Pending order: this is an order to be executed at a later time at the price you specify.

Explain the types of Limit orders.

1. Buy limit order: this is an order to buy at or below a specified price. 2. Sell limit order: this is an order to sell at or above a specified level.

What's Demo trading?

Demo trading is also known as paper trading and is a type of trading that allows you to practice trading strategies and get familiar with market conditions without risking real money.

What are the forex market sessions?

Tokyo session: 12am to 10am London session: 9am to 6pm New York session: 2pm to 10pm

What is Account balance?

The account balance is the amount of cash in your account.

What is Unrealized P/L or Floating P/L?

Unrealized P/L otherwise known as floating P/L refers to the profit or loss held in your current open positions — that is your current active trades.

What is Unrealized P/L or Floating P/L?

Unrealized P/L otherwise known as floating P/L refers to the profit or loss held in your current open positions — that is your current active trades.

What is Realized P/L?

Realized P/L is the profit or loss that comes from a completed trade.

What is Used Margin?

Used margin is the total amount of margin currently in use to maintain all open positions.

What is Used Margin?

Used margin is the total amount of margin currently in use to maintain all open positions.

What is Equity?

Equity is the sum of your account balance and all floating (Unrealized) P/L.

What is Free margin?

Free margin is the difference between equity and used margin. It is the margin available for use.

What is Margin level?

Margin level allows you to know how much of your funds are available for new trades.

What is Margin call?

A margin call is when your broker notifies you that your margin level has fallen below the required minimum level.

What is a Stop out level?

A stop out level is when your margin level falls to a certain percentage level in which one or all of your open positions are closed automatically (liquidated) by your broker.