What is Foreign Exchange?
The Foreign Exchange market, also referred to as the "Forex" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.2 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another Where is the central location of the FX Market? FX Trading is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over the Counter (OTC) or 'Interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.
Who are the participants in the FX Market?
The Forex market is called an 'Interbank' market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.
When does the FX market open for trading?
A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, then London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night
What are the most commonly traded currencies in the FX markets?
The most often traded or 'liquid' currencies are those of countries with stable governments, respected central banks, and low inflation. Today, over 85% of all daily transactions involve trading of the major currencies, which include the US Dollar (USD), Japanese Yen (JPY) , Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD) and the Australian Dollar (AUD).
How often are trades made?
Market conditions dictate trading activity on any given day. As a reference, the average small to medium trader might trade as often as 10 times a day. Most importantly, by not charging commission, our customers can take positions as often as necessary without worrying about excessive transaction costs.
What is a "CFD"?
A "Contract for Difference", it is an efficient means to enjoy the economic results of trading in shares and indices, without actually buying or selling on the exchange. This often translates into lower transaction costs and greater efficiency.
What is a currency cross?
It’s the pair that not including USD like EUR/GBP
What do the terms "BID", "ASK" and "spread" Mean?
Ask is the lowest price acceptable to the buyer of the particular currency at the moment; Bid is the highest price that the seller is offering for that currency. Together, the two prices constitute a quotation; the difference between the two is the spread.
How can I calculate my P&L?
You can calculate your profit & loss through Sigma website that we have a section that explains how profit and loss is calculated in out trading station.
What is a pip?
Is the smallest unit of price for any foreign currency, Digits added to or subtracted from the fourth decimal place, i.e. 0.0001.
What is the value of 1 pip?
pip characterizes the smallest incremental move an exchange rate can make for a currency. How much in dollars is each movement value, for example, per 100,000 Euros in EURUSD? How much is one pip worth per 100,000 Dollars in USDJPY? The trading size will be called 'Notional Amount'. The equation of calculating a pip value is :( one pip, with appropriate decimal placement/currency exchange rate) x (Notional Amount) Using USDJPY as an example, this yield: (.01/120.46) x USD100, 000 = $8.30or $8.30 cents per pip Using EURUSD. For an example, if there is:(.0001/1.0066) x EUR100, 000 = EUR 9.93 to get the value of the pip in USD multiply EUR 9.93 x (EURUSD exchange rate): EUR 9.93 x 1.0066 = $10.00This is in fact a general phenomenon with different currencies in which the currency is quoted first (such as EURUSD, GBPUSD, or AUDUSD): the pip value is always $10.00 per 100,000 currency units. Having a currency quoted first is the main reason of having a fixed pip value. Approximate pip values for the major currencies are as follows, per 100,000 units of the base currency: USD/JPY: 1 pip = $8.30; In other words a change from 120.45 to 120.46 is worth about $8.30 per $100,000.EUR/USD: 1 pip = $10.00; 1.0066 to 1.0067 is worth $10.00 per 100,000 Euros.GBP/USD: 1 pip = $10.00; 1.5765 to 1.5766 is worth $10.00 per 100,000 Pounds.USD/CHF: 1 pip = $6.87; 1.4555 to 1.4556 is worth $6.87 per $100,000.
What is a market order?
A dealer is said to make a market when he or she quotes bid and offer prices at which he or she stands ready to buy and sell.
How can I limit my risk?
Limit order which uses restriction on the maximum price paid or the minimum price received, and the stop loss order that uses predetermined price to close order to limit losses. Liquidity of the Forex market facilitates the execution of limit order and stop loss orders.
What is a Trailing Stop?
A stop-loss level set above or below the current price that adjusts as the price fluctuates. For a long position, a trailing stop would be set below the current price and would rise as the price advances. Should the price decline and reach the trailing stop, then a stop-loss would be triggered and the position closed. As long as the price remains above the trailing stop, the position is held. Indicators such as the Parabolic SAR or moving averages can be used to set trailing stops. Stops become markets orders when executed so the order may not be filled at desired price .As a result the initial risk can be estimated but not guaranteed.
What is a hedge?
The purchase or sale of options, spot, forward or futures contracts as a temporary substitute for a transaction to be made at a later date. Usually it involves opposite positions in the cash or futures or options market. Back To Top Back To FAQs
What is a rollover?
Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies, the swap is also called Tomorrow Next, Tom-Next or T/N.How are currency prices determined?
Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation, unemployment rate and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. What is a margin/leverage?
The usage of the margin to trade on a larger capital base. In foreign exchange a trader's leverage is often represented as a percentage of margin requirements. For example a 1% margin will give a 100:1 leverage, and so a trader with a deposit of $10,000 will be able to hold open positions of $1,000,000 being 100 times his net equity. The high degree of leverage that is obtainable in the trading of off-exchange foreign currency transactions can work against you as well as for you. Leverage can lead to large losses as well as gains.
The high degree of leverage that is obtainable in the trading of off-exchange foreign currency transactions can work against you as well as for you. Leverage can lead to large losses as well as gains.
What does it mean to be "long" or "short"?
In trading parlance, a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. In this scenario, the investor benefits from a rising market. A short position is one in which the trader sells a currency in anticipation that it will depreciate. In this scenario, the investor benefits from a declining market. However, it is important to remember that every FX position requires an investor to go long in one currency and short the other.
What is technical analysis?
An effort made to forecast future market activity by analyzing market data such as charts, price trends, and volume.
What is fundamental analysis?
Is analyzing of economic and political data with the goal of determining future movements in a financial market
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