1 – What is the Forex market?
The foreign exchange market (Forex), also known as FX, or the currency market, is a non-centralized electronic exchange where governments, banks, corporations, investment funds, traders and investors buy and sell the world’s currencies. Click here for an in-depth explanation of the Forex market.
2 – What is a Forex Broker?
A Forex Broker is the agent or middleman who works with the buyer and seller to facilitate a currency trade. Most brokers are affiliated with financial institutions and get paid by receiving the spread (difference) between bid and ask prices.
3 – Do you need a broker to trade currencies?
No. While having a broker is advisable for people who are just learning how to trade the Forex market, anyone can trade the FX without using a broker simply by using an online FX trading website.
4 – How Big is the Forex market?
Nearly USD $1.5 trillion dollars exchange hands in the Forex market every day, making it almost 150 times larger than the New York Stock Exchange (NYSE).
5 – Why do brokers give leverage?
Brokers give leverage in order to let traders participate in trades requiring more money than they have available in their trading account. This gives traders the opportunity to earn bigger profits without committing 100% of their available trading funds.
6 – Is Forex a Scam?
The Forex market itself is not a scam. It is a way for governments, financial institutions, investors and traders to participate in a chance to profit from fluctuations in world currency prices as well as a tool enabling any organization to buy or sell products and services in the currency of their customers. However, just as with any other investment activity, there are scams that use the Forex market to bilk unsuspecting people.
7 – Why do people trade currencies?
People trade currencies for a variety of reasons including having the opportunity to earn profits from their investment activities, transact business in local currencies, and hedge against the fall of their own currency.
8 – Is trading Forex Risky?
All investment activities involve risk. Forex trading is no different. As in any investment activity, you should never risk more money than you can afford to lose.
9 – Can I trust Forex Brokers?
Forex brokers are no different than brokers who deal in equities or any other investment vehicles. There are honest ones and there are dishonest ones. You should do your own due diligence before placing your trust in any broker. A good place to start the process is by seeing if your broker is registered with the National Futures Association (NFA) or other recognized regulatory body. If the answer is “no”, you may want to look for another broker.
10 – Why do brokers give different pips?
Different brokers have different formulas for calculating the pip spread depending upon their desired profit margin. The term ‘pip spread’ refers to the difference between the bid and the ask price of a currency pair. This difference is the amount of money the broker earns. Therefore, the lower the spread in terms of pips, the less the broker gets paid and the more profits the trader gets to keep.
