Frequently Asked Trading Questions

Trading FAQ’s2018-05-09T11:10:23+00:00

Got a trading question ?

I welcome your questions and will try to answer each and every one asked, so if you have specific questions please send them to me HERE.

In financial markets, specifically in the Forex market, pip (percentage in point) is a unit of change in an exchange rate of a currency pair. Most major currency pairs are priced to four decimal places, and a pip is one unit of the fourth decimal point: for dollar currencies this is to 1/100th of a cent.

A fractional pip is a tenth of a pip. This feature allows traders to benefit from smaller price increments and moves in the market. For example, instead of quoting prices with 4 digits i.e. EURUSD @ 1.4251 / 1.4253 most brokers quote the pair as 1.42508 / 1.42528 with the last digit quoted as a subscript. I personally ignore the fractional pip as I find it distracting.

The spread is the difference between the BUY price and the SELL price of two instruments. For example, if the EUR/USD is trading at 1.3100 (buy) and 1.3098 (sell), then the spread is 2 pips.

Leverage is used to significantly increase your purchasing power. No other market gives you so much liquidity and leverage at the same time. On some instruments brokers provide leverage of up to 400:1. This means that with a deposit of £100, you could trade with up to £40,000. Leverage is a double edged sword and is responsible for the majority of margin calls.

Margin is money you need to have in your broker account to secure your open position. Different brokers require different amount of margin money to keep your positions open.
Going “long” is when a trader buys an asset expecting its value to rise. This is also called opening a long position. Going “short” or opening a short position, is when a trader sells an asset, expecting its price to decline so it can be bought back in the future at a lower price.
The forex market opens for business at 22:00 Hrs GMT which is the start of the trading week (Monday) in New Zealand. The market then runs continuously, 24/5 for the next five days and closes at 22:00 hrs GMT on Friday which is the end of the working week in America.

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Leveraged trading carries a high level of risk to your capital. Please ensure that you fully understand the risks involved before you trade. Learn more HERE