17 FAQs of Forex Trading in 2020

17 FAQs of Forex Trading in 2020

The objective of this educational article is to provide a thorough and encompassing oversight into 17 of the most debated and questioned forex trading principles.

You see, tackling the foreign exchange markets is a daunting yet exhilarating task that can pay huge returns to an investor when performed correctly.

However, when you’re first starting out with forex trading you’ll likely begin to notice just how complex the work truly is, whereas a result, you then begin to have more respect for those who have been consistently and successfully conducting forex trading long before you.

Through answering some of the most trivial and frequently asked forex trading questions we hope to spark insight and inspiration for your impending ventures down the road.

With that in mind, let’s begin.

1. What is Forex?

Otherwise known as the foreign exchange market or FX market, forex is the world’s most widely traded market that generates a turnover of over $5.1 trillion per day.

2. How to Trade Forex?

Forex investing can be executed in varying capacities such as:

  • Self Investment
  • Managed Investing
  • Fundamental Trading
  • Signal Service Investing
  • Technical Analysis Investing
  • Online Trading System Trading

If you are new to forex trading, you will want to look at Divergence University – where every facet and element of forex trading is covered at university level course strength in an easy-to-understand format.

divergence university curriculum
Divergence University Curriculum & Courses.

3. What is Forex Trading?

The means through which one currency is converted into another. As a forex trader, you always trade between a currency pair by selling one currency while simultaneously buying a different currency.

4. How to Start Forex Trading?

There are many different avenues that you could consider when starting out with forex trading and depending upon your goals will dictate which avenue you pursue. Call us old fashion but we still believe the best way to start forex trading would be through an educational platform that provides you with all the tools, resources, and need-to-know so that you can begin to profitably invest while learning in the process.

5. Is Forex Trading Profitable?

Yes, forex trading can be profitable if you employ proven trading methodologies, rely upon consistent and user-tested trading systems, and are consistent with your money management techniques.

6. How Does Forex Trading Work?

Let’s say you would like to place a buy order on the EUR/USD currency pair. Trading funds are deducted from your account balance and are used to purchase the pairs case currency (which in this instance is the Euro) and sells the pairs quoted currency (the US dollar).

7. What is the Forex Market?

The forex market is the market in which investors can speculate, buy, sell, and exchange currencies and is comprised of banks, hedge funds, investment firms, retail forex brokers, commercial companies and investors.

8. Is Forex trading worth it?

Absolutely! If you have the grit, determination, and passion to change your life around and try to acquire financial freedom then forex trading is certainly worth it.

9. What is the volume indicator in MT4?

The MT4 Trading Volume Indicator transforms accumulated history data and provides an opportunity for day traders to detect fluctuations in price dynamics and peculiar trading set-ups that are invisible to the naked eye.

10. What is the best forex volume indicator?

There is quite a bit of debate regarding the best forex volume indicator and much of the debate stems from the differences in trading approaches and user intention but one of the best forex volume indicators would be the Chaikin Money Flow. Why? The Chaikin Money Flow is considered a classical volume indicator and it measures institutional accumulation-distribution, which can be used to accurately determine sell-offs – it is said the implementation of this indicator with sound trading techniques can generate a 77% success rate but again that is speculation.

11. What are pips and spreads?

Pips are commonly used to measure spreads, pips are the smallest unit of price movement of a currency pair. Generally, for most currency pairs, a pip is equivalent to 0.0001.

Example: EUR/USD – 1.35640 (Buy) – 1.35626 (Sell) = 0.00014 spread or 1.4 pips.

forex pips spreads example
Another Spread & Pip Example – Image Source: dailyfx.com.

12. When is the forex markets open for trading?

The forex markets are open 24 hours throughout different regions of the globe, starting from 5 p.m. EST on Sunday to 4 p.m. EST on Friday.

Forex Market Hours – Image Source: Investopedia.com.

13. What is margin?

It is important to understand that margins aren’t fees or a result of a transaction cost but rather a portion of your trading funds set aside by your forex broker to keep your trade open and to cover any potential losses that may occur. Margins are “locked up” for the duration of that particular trade and are returned to your account sum upon trade completion.

14. Can I lose more than I invest in Forex?

Yes, it is possible to lose more money than you invested in forex. Additionally, you should be aware that some forex brokers have the ability to close a trading position when the price approaches the point to where your losses are equal to the margin value of your account (to prevent losses on their end).

15. What is the best Forex Trading Strategy?

This is the equivalent of asking a dozen people from different parts of the globe to answer with their favorite food, meaning that it varies from person to person. Why is this? Well, not everyone is employing the same trading techniques nor do they possess the same goals as you. For a list of some of the most profitable and consistent trading strategies you can visit our Strategy Guide.

16. What are the “short” and “long” positions?

A long position in forex is where an investor buys a currency at one price and aims to later sell it at a higher price, benefiting from a rising market. Vice versa, a short position is when a trader sells a currency with the mindset that it will depreciate in value, therefore, enabling the trader to benefit from a bearish market flow.

17. Is forex trading a scam?

No, forex trading is not a scam. The foreign exchange market is the largest financial market in the world, it is even bigger than the stock market! On average, the daily volume of the forex markets exceeds $5.1 trillion.

Closing Thoughts

We hope that you’ve benefitted and have had some of your questions answered throughout the course of this Forex frequently asked question mock-up.

If you have additional questions relating to forex trading that you do not see above please feel free to ask away below and we’ll do our best to answer each and every one of your questions!

For those of you who need additional support for getting started with forex trading, we encourage you to reach out to us directly at support@vladimirribakov.com.

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Thank you for taking the time to read my article and please provide any feedback that you may have below!

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amylie curtis
amylie curtis
4 years ago

I enjoyed reading this post. I am more confident now towards forex and with the help of fx leaders, I know I can be successful. I will share this to my cousin who also eyeing to get into forex.

4 years ago

Kudos to bring this kind of Q&As

4 years ago

Wow, what a great idea, very informative faq for beginners