Do away with ignorance about the forex market - Some questions answered

December 8, 2012

Did you recently take the decision of trading the forex market in order to boost your monthly income? Well, with the spurring debt obligations within the nation, almost all consumers are looking for ways to augment their monthly income so that they have enough money to pay back their liabilities. Are you too wondering about the prospects of taking a plunge in the forex bandwagon in order to become debt free? If answered yes, you should clear your doubts about this particular market so that you don't base any of your decisions on wrong information about the currency market. Here is a list of the most common questions that hover around the minds of the investors when they're new to the trade. Check them out to boost your knowledge and thereby take better informed decisions.

What is the difference between the forex and the other markets?

Currency trading basically doesn't take place on a regulated exchange and is neither controlled by any government body. The members or the investors trade here with each other based on the credit agreements and their business usually depends on their metaphorical handshakes. The traders who participate in the forex market cooperate and compete with each other and this builds enough profits. It is certainly different from all the other markets as there is no fixed rule as there is in the stock market. There is nothing called insider trading in the forex market. It is also traded 24 hrs throughout the entire week.

What is a pip in the forex market?

A pip is nothing but the smallest percentage increase of trade in the forex market and it stands for a "percentage in point". Usually in the forex market, the prices are quoted to the 4th decimal point and if there's any change within that decimal point, it is known as 1 pip which is equivalent to 1/100th of 1%.

Is there any possibility of commission in the forex trading?

If you're a trader, this is rather good news for you that there are no commissions in the forex market. The entire forex market is a "principal-only" firm and all the forex firms are not brokers but dealers. They make money through the bid-ask spread and they don't need to charge commissions for making profits. Once the cost of the spread is cleared by the price, every penny that you gain means pure profit for the trader or the investor.

Which currencies are usually traded in the currency exchange market?

It certainly goes without saying that majority of the traders will trade the most liquid currencies in the market and they're only capable of making better profits. There are the most popular 7 pairs that account for almost 95% of the entire speculative trading. The most common currencies are EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD and NZD/USD.

Therefore, if you wish to try your luck in the forex market, you have to ensure clearing all your doubts before taking any step. Take into account the answers mentioned above so that you don't end up taking wrong decisions.

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