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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
How much is a micro lot?
1,000 units of base currency
25
Example: You are trading JPY/AUD, and order a standard lot. What is the price tag?
$100,000 Japanese Yen.
26
Example: What is the margin required to trade 20,000 units currency with 0 leverage?
20,000
27
Example: what is the margin required to trade 20,000 units currency with 1:100 leverage?
200
28
Example: Your buy price is 1.0500, and your sell price is 1.0600. What is your percent change?
1% profit
29
Example: your profit is 1% of 20,000 ( $200 ) on a 1:100 leveraged trade. What is your net profit's percentage?
100%
30
What is the biggest risk to new trader's accounts?
Misuse of leverage.
31
What is the purpose of short selling?
To profit from a the falling value of a base currency
32
Why does a successful short sell produce a profit?
Because you can sell the currency at a higher value, before buying it back low.
33
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?
Higher
34
What is technical analysis as compared to fundamental analysis?
The analysis of price patterns
35
What causes a base currency to rise relative to the quote currency?
A relative excess of buyers in the base currency.
36
What causes a base currency to fall relative to the quote currency?
A relative excess of sellers in the base currency
37
What causes the price action of a given currency pair to exhibit repeating patterns?
The consistently repeated behaviour of buyers and sellers in those currencies.
38
What are we attempting to predict when using technical analysis?
When other traders will buy or sell en masse.
39
Technical analysis is ultimately the analysis of ___________, through the instrument of price patterns and action.
Mass psychology
40
True or false, the best trading strategies are highly complex.
False
41
True or false, the best trading strategies are easy to understand and simple to execute?
True!
42
Each trading strategy has entry & exit criteria, risk management. What makes these effective?
Strictness and discipline!
43
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?
Strict adherence to the system's rules.
44
What is the main trading mechanism / tool for risk management?
Stop loss orders.
45
In the IP strategy, what is the maximum loss your stops should be set at?
1%
46
In comparison to day trading, trades that run over a period of days or weeks is called:
Swing trading
47
What time unit in the chart is commonly used in swing trading?
Daily charts
48
The general type of price action captured by Power trend trades is called:
Trending.
49
What general direction does a trending market have?
Increasing price.
50
Entering a power trend typically occurs after what price movement?
A dip
51
The general type of price action captured by Bounce trades is:
Trending
52
The entry for a Bounce is indicated by:
Psychological turning points in price.
53
In general, will you enter a Bounce or Power trend earlier in a given trending market?
A Bounce
54
Between Bounces and Power trends, which will tend to capture more price movements?
The Bounce
55
Reversals are similar to Bounces in that they capture :
Strong psychological turning points

FOREX Trading (8 decks)

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