Preschool - What is Forex Flashcards
What is Forex?
Forex is the biggest global market that allows one to trade two currencies against each other
Roughly how much is traded in FX per day
+- 6.5 Trillion per day globally
How much is traded in Retail?
Within the 6.5 trillion, 2 trillion is spot and 300 billion is retail fx trading
What in general is the exchange rate
In general the exchange rate of a currency versus another is a reflection of the condition of that country’s economy compared to the other
Which are the 8 Major currencies?
NZD - New Zealand Dollar - Kiwi AUD - Australian Dollar - Aussie JPY - Japanese Yen - Yen EUR - European Euro - Fiber GBP - Great British Pound - Cable CDF - Swiss Franc - Swissy USD - United States Dollar - Buck CAD - Canadian Dollar - Loonie
Why are they called Major?
Major because they are are the most heavily traded
Which are the categories of FX pairs
Majors, Crosses and Exotics
Which pairs are the Majors
Majors are the 8 majors with USD currency
Which pairs are the Crosses
FX Majors without USD
Why are Exotic FX pairs so volatile?
Due to lower level of liquidity in exotics, these pairs are far more sensitive to economic and geopolitical events
Why is the FX market considered OTC?
FX market is considered OTC because the entire market is run electronically, within a network of banks, over a 24 hour period - No central exchange
Roughly the ranking of FX trading distribution?
USD (80) -> EUR (40) -> JPY (20) -> GBP(8) -> AUD -> CHF -> CAD -> Others
Why is the USD the Major FX
- Largest Economy
- Reserve FX
- Largest/liquid financial markets
- Stable political system
- Military super power
- Medium of exchange cross border globally
Name four ways to trade in FX
Spot FX, FX Futures, FX Options, ETF
What are Futures
Contract to buy at specific price at specific date (Chicago Mercantile Exchange CME in 1972)
