Common Questions Asked In Forex Trading

It is not entirely surprising to know that the biggest financial market of this planet is at large an unfamiliar terrain to a relatively large mass of investors and traders given the fact that the access was some what difficult till the advent of internet lately. The other real fact is that the forex market was the domain of large banks and hedge funds that operated secretively enough which kept the masses at a distance. To this end, there are several fundamental questions that remained unanswered, from the point of view of both novices and the not so new traders and the investors alike.

Is The Forex Market Different From Other Markets?

Yes it is. The fundamental difference is that the forex market is not regulated by any centralized body as it is a world wide exchange market. Neither there are any clearing houses nor there are panels set up for arbitration dispute settlement. So how does the business go on? One has to go by trust and the metaphorical handshakes only.

The Advantage of Liquidity on Your Side

The biggest market in the world trades 24 hours a day and 5 days a week. The sheer size of it and the scope which extends from Asia to Europe to Americas is enough to make it the most accessible one in this world. The size of daily trade is over US$3 billion.

There Is No Commission Part in Forex Trading

A small surprise this. But this is not without a reason. Much unlike the stock or futures markets, where the brokers charge a commission for acting on your behalf as agents to buy and sell, the facilitators here are dealers who trade in principles and bear risk against investors' trades while making money through the currency market spread.

Prices are quoted in 'percentage of point'. This means all prices are quoted till the 4th decimal point which equals 1/100th portion of 1%. For example 1 Euro in INR = 59.1463 unlike in the normal everyday markets where prices are quoted upto 2 decimal points only. But this is not true of Japanese Yen.

What Do You Mean By Carry System?

Carry is pretty popular kind of trade with all and sundry which helps to pocket the inter currency interest differences apart from the capital appreciation in case of long position. This works fine when you finance your long position acquisition through low interest currency.