Forex Trading: Answers to the Most Common Frequently Asked Questions

What is the Forex Market？ 

The foreign exchange market, or forex market, is the most traded financial market in the world. The forex market is a global marketplace where financial institutions, banks, and investors can speculate on currencies. It is considered to be the largest and most liquid financial market in the world, with an average daily trading volume of $6.6 trillion. The forex is a decentralized market as all trading is done online, known as over-the-counter (OTC) trading. 

What is Forex Trading？ 

Foreign exchange is the process of exchanging one currency with another. This is a common financial process that can be performed for commercial or trading purposes. 

Forex trading is the speculation of currency prices for potential profits. Since forex trading is primarily exchanging one currency for another, currencies in the forex market are traded in pairs. The currency pair is a quotation for one currency against the other; known as quote currency and base currency. Currency pairs are affected by different fundamental and technical factors that affect the exchange rate. These factors include economic policies, political stability, trade flows, and of course the changes in supply and demand. 

What is a Currency Pair？

Forex trading is primarily the process of exchanging one currency for another. That is why currencies in the forex market are traded in pairs. The currency pair is a quotation for one currency against the other; known as quote currency and base currency. 

Currency pairs use the abbreviation of currency and country names. For example, the USD/JPY currency pair refers to the US Dollar against the Japanese Yen. 

Currency pairs in the forex market are divided into three main categories:

• Major Pairs: The major pairs are the most traded major currencies against the US Dollar. These pairs enjoy high levels of liquidity due to the elevated trading volumes. Examples of major currency pairs are EUR/USD, USD/JPY, GBP/USD, and USD/CAD. 

• Cross Pairs (Minor): A cross currency pair is a currency pair that does not involve the US dollar. Despite enjoying sufficiently liquid markets, they are less liquid than the major pairs. The cross-currency pairs with higher trading volumes are the ones that include a major currency. Some examples of cross currency pairs are; EUR/GBP, GBP/JPY, and EUR/CHF. 

• Exotic Pairs: Exotic pairs include currencies of emerging markets. They are not as liquid as majors or crosses, so they are characterized by higher price swings. USD/TRY and USD/MXN are among the exotic currency pairs. 

What is Exchange Rate？

The exchange rate is the value of a currency relative to another currency. It is the price at which one currency is being exchanged for another. For instance, if the exchange rate of the EUR/USD pair is 1.1200, this means that one euro equals $1.20, or it takes $1.20 to buy one euro. 

The rise in exchange rate reflects that the base currency is appreciating against the quote currency. Similarly, the fall in exchange rate reflects that the base currency is depreciating against the quote currency. 

What are the Most Traded Currency Pairs in Forex？

The top traded currency pairs are: 

• EUR/USD:  Euro vs. US dollar 

• USD/JPY: US dollar vs. Japanese yen

• GBP/USD: British pound vs. US dollar

• USD/CHF: US dollar vs. Swiss franc

• USD/CAD: US dollar vs. Canadian dollar

• AUD/USD: Australian dollar vs. US dollar

• NZD/USD: New Zealand dollar vs. US dollar 

• USD/CNY: US dollar vs. Chinese Yen 

• EUR/GBP: Euro vs. British pound

What are Forex Charts？

There are three popular types of price charts which are: 

• Line Chart: the most basic of trading charts, and the easiest for beginner traders. The chart represents only the closing prices over a period of time. In trading, the closing price is often considered the most important element in the price analysis.

• Bar Chart: It is made up of a sequence of vertical lines where each line is a representation of trading activity and includes more key information about prices. Each bar includes the high and low of the trading period, as well as the open and closing price that is represented by a side horizontal shorter line. 

• Candlestick Chart: the most popular in forex charts. Candlestick charts are easy to use and also very informative when it comes to highs, lows, opening, and closing prices. 

How to Choose a Reliable Forex Broker？ 

The Forex broker is an intermediary entity between retail traders and the forex market or the interbank system, in which major banks trade with each other. The broker provides financial services to facilitate the process of buying and selling foreign currencies for retail traders. Clients of a forex broker may also include large financial institutions that trade on behalf of retail customers and investment banks. 

Take your time searching for a reliable forex broker so your money and trades will be handled appropriately. The main features of a reliable broker include efficient customer support, real-time market execution, suitable trading conditions, a wide selection of account types that suits different traders depending on their financial capabilities, providing advanced software for successful trading, secure and fast money depositing and withdrawal, competitive spreads and finally but not least is offering multiple trading options with various currency pairs.

Checking the brokers regulatory compliance is very crucial.  You have to choose a regulated forex broker, which keeps you safe from scams and frauds. 

AximTrade Regulation guarantees accountability and transparency that protects the interests of our traders. AximTrade is regulated by the Financial Conduct Authority Scheme (BVIFSC) which ensures the broker‘s compliance with the highest international standards and best conduct of business practices. This means you won’t have to worry about your funds or the privacy and confidentiality of your transactions. Check the full Aximtrade Review for more insights about the brokers accountability and reliable services.

What is The Best Forex Trading Platform？

The trading platform is where you execute trading, its your trading portal. Nowadays, advanced trading platforms have transformed the overall trading process, making it easier and more accessible. 

The MetaTrader 4 platform offers real-time access to market prices and liquidity. Traders are able to view all details including spread, contract size, margin currency, and margin percentage. MT4 provides extensive tools for price analysis with a set of in-built technical indicators and charting tools. 

AximTrade, recognized as the best broker, offers its award-winning Metatrader 4 (MT4) trading platform for an outstanding trading experience. MetaTrader 4 has a very user-friendly interface, which enables new and experienced traders to trade with ease and comfort. Traders of all levels find this Forex platform easy to use. You can download the MT4 platform for your home computer, tablet, and phone. 

How to Learn Forex Trading？ 

There are many ways to learn forex trading, they can either be free or paid. Before investing your money, itll be better to invest in knowledge and educate yourself. Forex trading is based on the ability to understand trends and spot opportunities in the market. Therefore, the main step to learning forex trading is to believe in self-education and to be patient with your progress. Staying up to date with the key forex terms and what they really mean is very helpful.

By educating yourself, you can better manage your risk, trade profitably, and set yourself up for success in your new investment. While forex trading is easy to learn, youll still have to practice and embrace your mistakes. 

How to open a forex account？

A forex account is used to trade foreign currencies. Typically, you open a forex account, deposit money and then buy and sell currency pairs. Opening a forex trading account is a quite simple process these days given the growth of online forex trading. It requires some paperwork and a few security steps, such as identity verification, and all can be done online. But first, youll have to choose your forex broker, select an account type, register then activates your account. 

AximTrade offers a variety of options when it comes to forex accounts. Traders can choose the best account type based on their trading strategy, experience, and capital designed for investment. Choices include Standard, Cent, or ECN trading accounts. All AximTrade accounts offer negative balance protection with a low spread from zero to 1 pip on all majors. Traders can also enjoy a competitive forex bonus on all account types with a minimum deposit starting from $1.  Any trader can hold up to 14 active trading accounts. You are allowed up to 7 Standard Accounts, 2 Cent accounts, 5 ECN accounts and 1 infinite leverage account per Active Member Area. 

What is the Right Amount to Start Forex Trading？

The minimum amount of money you need to start with should be consistent with your goals. Other factors to consider are your trading style, your brokers minimum deposit requirements, level of experience, and risk exposure. In any case, you should never risk what you cannot afford to lose.

Disadvantages of Starting with a Small Capital

• Small investment capital means small lot sizes, fewer opportunities and limited profitability. A trader can get frustrated by small gains and probably give up trading.

• Trading costs can significantly affect your trading balance. Larger accounts usually enjoy lower spreads than the smaller ones.

• A small capital will get you stuck with day trading as you cannot afford to follow another trading strategy. You will have to monitor your trades carefully and make sure to close them by the end of the day as the swap rates may blow up your account.

Can I Start Forex Trading with only $100？

It is possible to start forex trading by investment capital as low as $100. However, such a low amount will limit your trading options and profit potential. Let‘s assume you managed to achieve a 5% return on a trade, which is a great profit percentage. However, in this case, the profit will be only $5. But if you’re trading with a $2000 capital, the return on this single trade would be $100.

Is Forex Trading Profitable？

Yes, it can be profitable if you follow a clear trading strategy, developed a Successful Trading Mindset and adopt a sound trading plan with clear objectives.

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Original Article: Forex Trading: Answers to the Most Common Frequently Asked Questions | Forex FAQs

Disclaimer: This post is from Aximdaily and it is considered a marketing publication and does not constitute investment advice or research. Its content represents the general views of our editors and does not consider individual readers' personal circumstances, investment experience, or current financial situation.

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