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Forex FAQ

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What is FOREX?

Forex is short for Foreign Exchange and it refers to the international currency trading market. This is an over-the-counter market which allows traders to participate in the ever-changing forex trading currency exchange rates. A good example is the U.S. Dollar versus the Euro.

        

When does the forex market start?

The Forex market is basically open 24 hours per day, every day. However, not every brokerage is open 7 days a week. There also may not be much trading activity on the weekends.

Are there commissions?

This depends on the brokerage but many do not charge commissions and instead make their money via "the spread."

What is the spread?

The forex spread is the difference between the buying and selling price of the currency quotes. Usually your buy price (the ASK price) is slightly higher than your sell price (the BID price) at a given moment so that you cannot make a profit instantly.
This spread exists so the banks and brokerages can make a profit without charging you a per-trade commission.
Example: EUR/USD Bid:1.4671, Ask:1.4674

What is a PIP?

A pip, or "percentage in point,", is the smallest amount a currency pair can change. With U.S. Dollar quotes this usually refers to a $0.0001 change. For example, if the EUR/USD changes from 1.4670 to 1.4675, that is a 5 pip change. Also note that if your lot size is say 100,000, the total pip would be 100,000 x $0.0001 = $10, which is the smallest amount your holdings could change. The $0.0001 is called the "tick size", which depends on the currency pairs involved.

What lot sizes are available for each trade?

Many brokerages allow lot sizes in increments of 100,000 in a regular Forex account, increments of 10,000 in a "Mini" account, and sometimes as low as 1,000.

Warning: Forex Currency Trading involves significant risks. Please read our Forex Risk Disclosure.
 
   
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