forex questions and answers

Forex Quations and Answers

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Yes, definitely it is possible. However, to become productive with Forex trading, will not happen in one day. It can take several years for a trader with a small account to grow it into a big one. And always, in every position opened the trader have to face the risk of losing all the funds which bring up a question:

Which is the optimal amount to start a Forex trading account?

There are Forex brokers who allow trading even with $1 in the account. Practically, it is not possible to earn meaningful stream of income with such a little amount. Even a seasoned trader may face a series of 5-6 losses in a row. As a rule of thumb, a trader should not lose more than 2% of the capital whenever a stop-loss order gets triggered.

Going by this rule, someone who trades 0.01 lots, uses a leverage of 1:100, and places a stop-loss order at 50 pips away from the entry, may need roughly $350 as the initial capital. Anything lower than that would just trigger premature stops. The risk of losing the trading account will decrease as the initial capital increases, provided the trader uses prudent risk management and position sizing techniques.

While a sum of $350 may be sufficient to start Forex trading, it would be a Herculean task to grow such a small investment into millions of dollars. By increasing the starting amount, a Forex trader can considerably decrease the time and effort required to achieve the coveted status of ‘being rich.’ This is because large volumes can be traded with relative ease. A few big trades could take the balance closer to the desired level.

Forex questions, and answers – As long as the lot size is determined conservatively, it would be easy to grow a trading account quickly with a large initial investment.

To succeed in trading, a trader should have good knowledge of fundamental and technical analysis. Traders should keep themselves up-to-date with latest news, political announcement, and industry developments. Additionally, discipline and patience are must-have virtues.

Remember, currencies can suddenly turn volatile due to economic incidents. For example, unexpected central bank rate hike or cuts, poor GDP and job data, terrorist attack, a war between two countries, UN sanctions, riots, etc. all this are market movers that can create unexpected trend reversals, leading to huge losses or even wipe-out of account. That’s why professionals traders advise investing only surplus funds in Forex trading.

How forex trading works?

As you can see in the introduction to this article, currencies are exchanged in the forex market.  In particular, the object of trading are the currency pairs from around the globe.  Let us take an example of a pair, using the most famous and negotiated asset in the currency market: the great euro/dollar pair, indicated with EUR / USD. The currency on the left, the euro, is called the base currency and conventionally assigns the value of 1.

The price of this pair shows us how much in dollars we need to buy a euro.  For example, if the quotation reaches 1.1512, it means that to buy one euro we need to pay 1.1512 dollars. The possibilities of trading Forex are endless since it is possible to trade almost any currency pair in the world. However, traders also called speculators, are generally limited to trading using the most critical currencies.

Trading Sessions – when forex market open

Day traders the most productive hours are between the opening of the London markets at 08:00 GMT and the closing of the US markets at 22:00 GMT. The peak time for trading is when the US and London markets overlap between 1 pm GMT – 4 pm GMT. The main sessions of the day are the London, US and Asian markets.

Below, a brief overview of trading sessions to help you make the most of the market:

LONDON SESSION – from 8 am GMT – 5 pm GMT; EUR, GBP, USD are the most active currencies;

US SESSION – from 1 pm GMT – 10 pm GMT; USD, EUR, GBP, AUD, JPY are the most active currencies;

ASIAN SESSION – from 10 pm GMT on Sunday afternoon, goes into the European trading session at about 9 am GMT; day traders usually ignore this session.

When forex market close, traders rest their account and nerves; sometimes they take that time to evaluate the results of previous trades and to determine future actions. Of course, if you are dedicated to the forex market partially, you will soon notice that your positions will occupy a significant time in your head. it is always healthy some time off.

Forex where to start

To invest in Forex you must open an account in a platform online which will allow you to start with Forex trading. This is basic. But before you even consider to look into a broker platform, you must first look into a broker educational material. I know there are plenty eBooks and video tutorials, ect. But brokers ussually present updated information we can check.

Do not open a real account just from the start. Remember, we are talking about the possibility of making money or wasting money. In both scenarios, you see the importance. It is the broker the one that executes the trades when buying or selling currencies that the client wants, in exchange for charging a commission-a spread, based on a small differential between the purchase price and the sale price.

If you want to invest in Forex and you are retail an investor, you must first choose an online broker with experience, solid background, without high fees. It got to be a regulated broker and by one of the leading authorities such as the National Securities Market Commission (CNMV) in Spain, the Financial Conduct Authority (FCA) in the United Kingdom or from another country. Do NOT trade with unregulated brokers.

frequently people ask: me where forex is located?

There is no such a central location of the foreign exchange market. Transactions in the FX market takes place in several different ways, 24 hours a day. Through various channels all over the world; happening wherever one currency needs trading for another one.

Say you go to a trip in any country. For a fact you will need the local currency, then you go and exchange your currency for the local one. That is Forex.

Which forex broker has the best spreads?

It is a wide question, since Brokers tends to “play” with their spreads in order to attract more clients. More than worry about the best spreads, we should be more aware of how to understand what the spread is and what types of spreads are out there.

The spreads comes in two main types: Fixed and Floating.
Ignore those brokers claiming to “not to charge spread”. Because one way or another they will charge a commission for us to open a position with them. They can change the name of the spread to, whatever they want. But the reality is that they will always charge you something.

Fixed spreads as the name itself are commissions which will not vary. At least they shouldn’t. If they do, then why do they called it fixed? But sometimes markets conditions or volatility, provokes brokers to protect themselves. Of course many brokers will tell you “is to protect you”. But no that is not 100% true, maybe 10%. Got it?

Floating spreads are those commissions which vary based on the feed, or the prices per instrument that the Liquidity Providers of the brokers are sending to them.

Base on these conditions, who trades forex?

Actually thousands of speculators does. mainly because the spreads, fees, commissions they pay per trade is mostly insignificant in comparison with the total size of the position. But as stated above, do not jump into trading without having a clear understanding of the basics.

Why Forex Trading

You got to be a person who really likes risk, nerves, and of course, you are having some extra cash you can afford to lose. If you are not, then do not come to this industry. you see, forex trading is not for everybody. the big majority of investors who join this market, loses their money, and the money of others, which is worse. Because the came to do the right thing the wrong way.

It is only when you are fully informed about the basics of forex trading, when you can start using a demo account, creating a trading strategy and learning about technical and fundamental analysis. it is then and not before when a trader or speculator can think of joining the markets. Notice I wrote think and not join alone, because you gotta think twice.

Why forex traders lose money?

The answer is simple, every trader loses money. There is not one trader who can tell you “I don’t lose money.” simply because the issue is not about losing money, but how much are you losing in the face of your winning.

Losing is part of this industry. That is why one of my favorite strategy is to trade correlated. One position might lose while the other might win. The key is to focus on the trend we are more confident that it will be a good chance. But again, avoid burning your account in one trade. contact me to share with you my correlated strategy, you will be surprised.

Forex candle – A common thing when trading

There several indicators in a trading chart, being Shares, stocks, indexes, or forex, including cryptos. in order to reflect the price action of an asset we must have them. But when it comes to get the most information of the behavior of an asset, Japanese candlesticks provides the best and more completed information. take a look at the folowing image:

Notice the closing price in the green candle will become the opening prices of the red candle, only when your previous set period of the chart.

There are hundreds of different types of Forex candlesticks. I won’t talk about them in this article. It will take several pages in order to explain them all.

Forex candlestick patterns most used

Based on the pattern formed by the candlesticks chart we can try to understand the sentiment of the market. Say we are tempted to open a position on EURUSD. If you see a clear trend up, you can also notice the length of the candlestick. Even if bullish or bearish. Meaning long or short, up or downtrend.

Check the chart below:

forex questions and answers
Forex – Questions and Answers

In the forex candle patterns, you can see the price action. Also, with some practice, you can tell the sentiment of the market. Together with a superficial fundamental analysis you can speculate the future trend and jump in according with your conclusion. Remember, not always the market behave as we suppose it will. There is where risk is lurking.

The Forex candlestick chart is just one of many ways to analyze the price action of an asset, but candlesticks still holding the crown when it comes about gathering the most information on a glance.

Forex for beginners

One of the biggest enemy for a beginner on trading forex is the greed. This at the same time and paradoxically brokers will use it against the new boy in town. If this is your case, fasten your seatbelt because after you finish reading this, you won’t be the victim of a greedy broker.

Before starting trading, I told you to start with education first, remember?
but one thing that got to be in you is the serenity and compromise to start doing things right from the start. A demo account is with fake money, we are clear about that. but what about the practice? Practice is what will give you the profits. So you want to start taking it seriously. Yes you open a demo account, now picture in your mind that the money in that account is for getting the most important skill you can ever get, practice.

If you start demotivated just because it is a Demo account, then don’t. please don’t have that attitude or don’t trade at all. For you see beginners tends to neglect the fact that is with practise that we reach the mastery. As life itself.

So next time you open a demo account, go serious.

I know that if you have a few experiences you might be thinking, well, brokers do manipulates Demo accounts so people can get better results. That might be true in some brokers. Here is my advice: Go and compare the price action from any given Demo account in the prober you choose. Say you open Yahoo finance, and compare it with the chart you see in the demo you just created. If the difference is more than a second, move to another broker. As simple as that. What I usually do, is create three demo accounts, check google, Bloomberg and Yahoo charts, The I will choose the one that inside the one second is giving the best timing.

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