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FOREX Trading > IP Lesson 1 > Flashcards

IP Lesson 1 Flashcards

0
Q

What percentage of trading performance is based on strategic factors?

A

20%

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1
Q

What percentage of trading performance is based on psychological factors?

A

80%

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2
Q

When trading FOREX, what are you trading?

A

Currencies

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3
Q

Do currencies have an absolute value?

A

No.

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4
Q

What gives a currency it’s value?

A

The current demand for that currency.

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5
Q

How is any currency valued in the FOREX market?

A

In relation to other currencies.

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6
Q

When trading, why are currencies traded in pairs?

A

The currency must be bought or sold in another currency.

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7
Q

When trading a currency pair, what is the currency on the left?

A

The base currency.

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8
Q

When trading a pair, what is the currency on the right?

A

The Quote currency.

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9
Q

When trading a currency pair, which of the two are you buying?

A

The base currency.

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10
Q

When buying a currency pair, which of the two are you selling?

A

The Quote currency

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11
Q

When buying a pair, which of the currencies must increase to create profit for you?

A

The base currency

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12
Q

When selling a pair short, which of the currencies must decrease in value for you to profit?

A

The base currency.

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13
Q

What is the unit for measuring price movements?

A

A pip

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14
Q

What does pip stand for?

A

Percentage in point

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15
Q

What other term is commonly applied to pips?

A

Points

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16
Q

When reading a price quote, which decimal place does the pip represent?

A

The 4th decimal place

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17
Q

The 4th decimal place represents what fraction of the price?

A

1/10,000th

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18
Q

Which currency pairs are exempt from the 4th decimal place pip standard?

A

Any involving the Japanese Yen

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19
Q

In JPY related trades, what decimal place does the pip represent?

A

The 2nd.

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20
Q

The 2nd decimal place represents what fraction of the price?

A

1/100th

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21
Q

What amounts is currency formally traded in on FOREX markets?

A

Lots.

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22
Q

How much is a standard lot?

A

100,000 units of base currency

23
Q

How much is a mini lot?

A

10,000 units of base currency

24
Q

How much is a micro lot?

A

1,000 units of base currency

25
Q

Example: You are trading JPY/AUD, and order a standard lot. What is the price tag?

A

$100,000 Japanese Yen.

26
Q

Example: What is the margin required to trade 20,000 units currency with 0 leverage?

A

20,000

27
Q

Example: what is the margin required to trade 20,000 units currency with 1:100 leverage?

A

200

28
Q

Example: Your buy price is 1.0500, and your sell price is 1.0600. What is your percent change?

A

1% profit

29
Q

Example: your profit is 1% of 20,000 ( $200 ) on a 1:100 leveraged trade. What is your net profit’s percentage?

A

100%

30
Q

What is the biggest risk to new trader’s accounts?

A

Misuse of leverage.

31
Q

What is the purpose of short selling?

A

To profit from a the falling value of a base currency

32
Q

Why does a successful short sell produce a profit?

A

Because you can sell the currency at a higher value, before buying it back low.

33
Q

A successful short sale means that you have sold a base currency into the quote currency at a higher or lower value than you buy?

A

Higher

34
Q

What is technical analysis as compared to fundamental analysis?

A

The analysis of price patterns

35
Q

What causes a base currency to rise relative to the quote currency?

A

A relative excess of buyers in the base currency.

36
Q

What causes a base currency to fall relative to the quote currency?

A

A relative excess of sellers in the base currency

37
Q

What causes the price action of a given currency pair to exhibit repeating patterns?

A

The consistently repeated behaviour of buyers and sellers in those currencies.

38
Q

What are we attempting to predict when using technical analysis?

A

When other traders will buy or sell en masse.

39
Q

Technical analysis is ultimately the analysis of ___________, through the instrument of price patterns and action.

A

Mass psychology

40
Q

True or false, the best trading strategies are highly complex.

A

False

41
Q

True or false, the best trading strategies are easy to understand and simple to execute?

A

True!

42
Q

Each trading strategy has entry & exit criteria, risk management. What makes these effective?

A

Strictness and discipline!

43
Q

What is the essential behaviour on the part of the trader that causes their system to be able to trade an edge and profit over time?

A

Strict adherence to the system’s rules.

44
Q

What is the main trading mechanism / tool for risk management?

A

Stop loss orders.

45
Q

In the IP strategy, what is the maximum loss your stops should be set at?

A

1%

46
Q

In comparison to day trading, trades that run over a period of days or weeks is called:

A

Swing trading

47
Q

What time unit in the chart is commonly used in swing trading?

A

Daily charts

48
Q

The general type of price action captured by Power trend trades is called:

A

Trending.

49
Q

What general direction does a trending market have?

A

Increasing price.

50
Q

Entering a power trend typically occurs after what price movement?

A

A dip

51
Q

The general type of price action captured by Bounce trades is:

A

Trending

52
Q

The entry for a Bounce is indicated by:

A

Psychological turning points in price.

53
Q

In general, will you enter a Bounce or Power trend earlier in a given trending market?

A

A Bounce

54
Q

Between Bounces and Power trends, which will tend to capture more price movements?

A

The Bounce

55
Q

Reversals are similar to Bounces in that they capture :

A

Strong psychological turning points

FOREX Trading (8 decks)

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