Forex Trading FAQ

Forex Trading FAQ

Here’s some useful facts you should know if you’re thinking about jumping into what’s probably the most trader-friendly markets in the world.

Huge Size: The forex market is unique in that its sheer size makes it almost impossible for any one person, institution or government to control. Average daily turnover is $3.98 trillion, which is more than the combined turnover of the New York and London Stock Exchange on any given day. Even the bond markets are smaller than forex!

Accessibility: Forex trades are executed 24 hours a day, 5.5 days a week. It’s a non-stop market from 20:15 GMT on Sunday until 22:00 GMT on Friday.

Unparalleled Liquidity: The combination of size and hours make forex exceptionally liquid. This allows customers, fund managers and banks to buy and sell foreign exchange on a global basis. The trade of goods, services, loans and speculation leads to a very active market.

No Central Control: Forex has no centralized market. Traders buy and sell forex via telephones and computers linked to brokers, bank and other traders around the world. This means forex isn’t enslaved to a single market-maker or exchange.

Exceptional Leverage: Forex’s high leverage makes it possible to risk small amounts of money to make a lot of profit. Here at Exential Group our traders typically risk 0.5% per trade to return 7-8% per month.

To learn more about forex in general, check out the FAQ section just below …

Q. How fair is the forex market?

No one is a player, not even the central bank of a particular country can completely control the market direction of a currency. Therefore forex is less prone to manipulation than any other market. In the short term, it can move sharply in response to economic news or central bank interventions, but outright manipulation against market sentiment is beyond the financial means of even the biggest market players.

Q. Where is the forex market’s central location?

There isn’t one! The forex market is not controlled by a centralised exchange (as with stock and futures markets). It is instead an Over the Counter (OTC) market. Transactions are made from globally-diversified locations 24 hours a day, 5.5 days a week.

Q. Who are the participants?

The forex market is called an ‘interbank’ market banks (including central banks), commercial banks, and investment banks have historically been the main players. However, participation from other market participants is rapidly growing due to the popularity and availability afforded by Internet trading. Today there are large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators engaged in forex speculation and hedging.

Q. What are the most commonly traded currencies?

Over 85% of all daily transactions involve the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the Australian Dollar. All these currencies are based in nations with stable governments, respected central banks, and low inflation.

Q. What does it mean to have a ‘long’ or ‘short’ position?

If you buy a currency you have a long position. If you are selling short a currency then you have a short position. Because currencies are paired together, you are simultaneously long one currency and short the other.

For the EUR/USD, if you “buy the Euro” you are long the Euro and short the US Dollar. If you “short the Euro” you are short the Euro currency and long the US Dollar.

Q. What affects the prices of currencies?

Currency prices (a.k.a. exchange rates) are affected by economic and political conditions including interest rates, inflation and political stability.

There are sometimes also central bank interventions where governments influence the short-term value of their currencies by flooding the market with their domestic currency to lower the price or else buying it to raise the price.

However, the size and volume of the forex market makes it impossible for any one entity to “drive” the market for any length of time.

Q. How do I make a profit in forex?

With Exential Group, we take care of that for you. In return for an agreed fee taken only from profits, we strive to produce exceptional returns on your money each month.

If your account doesn’t show a profit, there’s no fee payable.