frequently asked questions

WHAT IS FOREX ?
The forex market is often also called the "foreign exchange market" or the "currency market". The forex market is the largest and most liquid market in the world with an average daily turnover of $5.1 trillion. The forex market is where banks, businesses, governments, investors and traders come together to exchange currencies or speculate on currencies. Forex is open 24 hours a day and 5 days a week. The world's most important forex centers have been located in London, New York, Frankfurt, Sydney, Tokyo. Forex is a product of all the major banks where each bank has different prices. Currency trading is mediated to us by brokers through trading platforms. "Forex" or "FX" means "foreign exchange". You sell the currency you hold, say Swiss francs, and buy another, say US dollars. And just like buying currency, when you go abroad for a holiday, the bank, post office or exchange office at the airport will quote two prices: one for selling US dollars and one for buying francs. The bulk of forex trading involves only three currencies - the US dollar, the euro and the Japanese yen. (For example, selling US dollars to buy euros, selling euros to buy yen, etc.) Forex trading can, of course, take place between any two currencies used around the world.
HOW TO TRADE ON FOREX ?
The broker will usually give you access to their online trading platform. You can then link it to your bank account and start trading. There are many specialized platforms for forex trading that are designed for private individuals.
WHO IS THE BROKER ?
A broker is a financial company called a brokerage firm that allows an investor to trade on the financial market. For allowing such trading, the broker demands some form of fee from the investor, mainly in the amount of the spread/commission. There are three types of brokers - MM, ECN, and STP. Each of these three types of brokers has different trading conditions as well as fees (spread/commission amounts) for trading. We can further divide brokers into exchange and over-the-counter (OTC) brokers.
WHAT IS NFP ?
When the NFP (Non-Farm Payroll) is announced, we always find out how many jobs were created in the US in the last month. It does not count jobs in agriculture and non-profit organizations. This is one of the most watched economic reports, not only in America but all over the world.
WHAT ARE PIPS AND LOTS ?
Forex traders buy and sell currencies in so-called LOTS, which is actually something like a contract that is then traded. In forex, currencies are traded a bit differently than when I normally go to the bank and buy 124 dollars for 100 euros. When I go to the bank the lowest value I can theoretically buy or sell is 1 cent or 1/100 of a euro. In forex, currencies are bought in fractions, that fraction is just 1 point or pip. Specifically, for the EUR/USD currency pair, then 1 point or 1 pip is equal to 0.0001.
FOREX FUNDAMENTAL ANALYSIS
To understand the essence of fundamental analysis, we need to understand how a country's economy and politics affect its currency. When we fully understand this relationship, we will be able to determine how the supply/demand for a currency will behave for a particular fundamental. In order to find out how an economy is doing, we look at various indicators. Some are issued officially (Statistics Canada, Treasury, etc.), others by independent bodies (ADP, HSBC Purchasing Managers' Index, etc.) If the economic data is strong, i.e. the economy is strong, interest rates rise and it becomes attractive to foreign investors. Investors invest in this economy, but they have to acquire domestic currency to do so.
FOREX TECHNICAL ANALYSIS
While in fundamental analysis, a trader tries to predict the development of the exchange rate based on various economic news, in technical analysis we look at the future development of the price through historical prices and previous market behavior. The fascinating thing about technical analysis is that everyone has the same information at their disposal, because all traders are looking at the same chart and the development of the exchange rate. All technical analysis is based on the fact that history repeats itself, through various predictable patterns (patterns). As we have already mentioned, a technical trader analyzes historical price movements, for which he needs a price chart.
FOREX DICTIONARY
What do basic forex terms mean? If forex terminology is a problem for you, feel free to browse our forex glossary.
Forex dictionary
  • AOS
    Abbreviation for Automated Trading System, in English Expert Advisor (EA). It is a software that buys/sells an instrument based on an algorithm.
  • ARBITAGE
    A trading strategy that takes advantage of price differences of individual instruments. A price difference can arise, for example, if the same instrument is traded on different exchanges.
  • ASK
    The asking price at which a trader buys currency.
  • BACK-TESTING
    Back-testing a trading strategy on historical prices
  • BALANCE
    Balance - the value of the funds in the account without counting open trades.
  • BEAR
    Bear - the designation of a trader who speculates on a decline in the price of an asset/currency pair.
  • BID
    The bid price at which another trader/broker buys an instrument from us.
  • BOE
    Bank of England - Central Bank of Great Britain
  • BOJ
    Bank of Japan - Bank of Japan
  • BREXIT
    The designation for the UK's withdrawal from the European Union.
  • BROKER
    Broker
  • BULL
    Bull- A designation for a trader who speculates on the rise in the price of an asset/currency pair.
  • BUY
    Buying. An order in the platform to buy an instrument.
  • CPI
    Consumer Price Index (CPI) is an economic indicator that measures inflation in a country.
  • DEMO ACCOUNT
    A practice account with notional capital through which a trader can become familiar with the trading platform and try out trading.
  • DIVERGENCY
    A contradictory development of the indicator and the price - e.g. when the price makes a new low but the indicator no longer does.
  • DOWNTREND
    A downtrend (bearish)
  • EQUITY
    The value of funds in a trading account after accounting for open trades.
  • ECB
    European Central Bank
  • FED
    Federal Reserve - US Central Bank
  • FUNDAMENTAL ANALYSIS
    The objective of fundamental analysis is to predict price movements based on fundamentals such as economic data, political events, various news, etc.
  • COMMISSION
    This is a type of fee who a trader pays when opening a position
  • KIWI
    Slang term for the New Zealand dollar (NZD)
  • LONG POSITION
    When a trader buys an instrument - he expects its price to rise
  • MARGIN
    Cash collateral that covers potential losses
  • MARGIN CALL
    A situation where the amount of the trading account falls below the amount of the margin
  • MARKET MAKER
    A market maker (broker or bank) who makes prices and is ready to buy/sell at these levels.
  • PIP
    The smallest movement in the exchange rate, usually one basis point (in the case of EUR/USD it is 0.001).
  • RESISTANCE
    A designation for a price level that a currency exchange rate is unable to overcome. It is the level at which selling of the currency can be expected.
  • SELL
    Sell. An order in the platform to sell an instrument
  • SELL LIMIT
    Pending sell order.
  • SHORT POSITION
    When a trader sells an instrument - he expects its price to fall.
  • SL
    Short for Stop-Loss.
  • SPREAD
    The difference between the buy and sell price. The tighter the spreads, the more liquidity there is in the market.
  • STOP LOSS
    A trade order that aims to minimize losses. When a specific price is reached, the order will be closed.
  • TAKE PROFIT
    A trade order that aims to maximize profits. When a specific price is reached, the order will be closed.
  • TP
    Short expression for Take-Profit
  • TRAILING STOP
    This is a trailing stop-loss that provides the trader with a portion of the profit.
  • UPTREND
    A rising (bullish) trend.