The Three Most Asked Questions in Forex Answered

For every single person who set his or her eyes on the forex market and for those who are yet to step here, this is for you. The questions that we will answer today is something that we are pretty sure have been answered by every single forex trader. This is because not only are these questions the most commonly asked, they are also the most basic.

While it is one of the biggest markets of the world, it remains as one of the most complex and mysterious. This is because the Forex industry is a relatively new market. That’s why it is imperative that all traders know the answer to the three following questions.

1. What is Forex?

Perhaps the most basic question of them all is this. And the simplistic answer is that Forex is the foreign exchange. That’s it. A shortcut for two basic words. However, it entails a big world of explanation. We’ll try to keep it short and simple.

Forex is a decentralized global market where all the world’s currencies are traded. This is where all the magic happens. In essence, currencies are the name of the game. The foreign exchange now becomes a “market” because market participants buy and sell currencies here. People, institutions, and companies all over the world participate in this volatile and exciting market. On an average day trillions worth of money change hands. It’s a pretty lucrative business for those who are smart enough and passionate enough to take it on.

2. What is a Pip?

Once forex is in your mind you will inevitably ask this question: what is a pip? Simply said, a pip is the most basic increment of trade in forex.

Pip stands for Percentage In Point. It is standard of measurement by which profits and losses are calculated in the forex market. The pip is roughly equivalent to one unit of currency in which your account is denominated.

3. How Do You Make Money in Forex?

Many traders have found success and failure in the forex market. You make money by simply buying and selling currencies.

Because the value of currencies change quickly, traders are able to take advantage by buying the currencies at a low price then hoping that it goes up in price and then selling it. The difference in the buying and selling of these currencies is the profit. Of course, the trader must first correctly predict an increase of price. In case the price lowers after the trader buys it, then it becomes a loss.

The Forex Industry is a complex place full of opportunities and risk. Take the time to learn more about it and maybe you’ll find your success in this exciting market.