Forex: Terminology

Question 1

Define Forex

Answer 1

• Foreign exchange market
• Largest market in the world
• A global market that allows you to trade one currency with another currency

Question 2

Currency Pair

Answer 2

Quoting one currency against another

Question 3

Base Currency

Answer 3

The first currency listed

Ex. The EUR in EUR/USD

Question 4

Quote Currency

Answer 4

The second currency listed

Ex. The USD in EUR/USD

Question 5

Exchange Rate

Answer 5

The ratio of one currency valued against another currency

Question 6

What is the most traded currency pair?

Answer 6

USD

Question 7

What makes something a a major currency pair?

Answer 7

USD (most traded) is involved in each one

Question 8

Major Currencies

Answer 8

1. USD (U.S. Dollar)
2. EUR (Euro)
3. JPY (Japanese Yen)
4. GBP (Great British Pound)
5. AUD (Australian Dollar)
6. CAD (Canadian Dollar)
7. CHF (Swiss Franc)

Question 9

Major Currency Pairs

Answer 9

1. GBP/USD 2. USD/CAD
2. AUD/USD
3. USD/CHF
4. USD/JPY
5. EUR/USD 7. NZD/USD

Question 10

What is a cross pair?

Answer 10

Any pair that does not include the U.S. Dollar
Ex. CAD/JPY
AUD/JPY
GBP/NZD
CHF/JPY
EUR/GBP

Question 11

Why is the U.S. economy the largest economy in the world?

Answer 11

It’s half of every major currency pair, making up 84% of all transactions

Question 12

Commodities

Answer 12

A currency pair that involves raw products like oil, gold, silver, or coffee

Question 13

Exotics

Answer 13

A currency pair that consists of one major currency and one currency from an emerging market (EM)

Question 14

Indicies

Answer 14

• Short for a stock index
• A measurement of the price performance of a group of shares from an exchange. … Indices are a highly liquid market to trade, and with more trading hours than most other markets, you can receive longer exposure to potential opportunities

Question 15

Commodity: XAU/USD

Answer 15

Gold

Question 16

Commodity: XAG/USD

Answer 16

Silver

Question 17

Commodity: XPT/USD

Answer 17

Platinum

Question 18

Commodity: USOIL

Answer 18

Oil (very volatile)

Question 19

Exotic: USD/ZAR

Answer 19

USD/ South African

Question 20

Exotic: USD/CNH

Answer 20

USD/ Chinese Yuan

Question 21

Exotic: USD/DKK

Answer 21

USD/ Danish Krone

Question 22

Exotic: USD/MXN

Answer 22

USD/ Peso

Question 23

Indices: New York Session

Answer 23

1. US30- DOW Jones
2. SPX500- S&P 500
3. NAS100- NASDAQ

Question 24

Indices: London Session

Answer 24

1. Ger30
2. UK100
3. FRA40
4. ESP35

Question 25

Indices: Tokyo Session

Answer 25

1. JPN225

Question 26

Indices: Cryptos

Answer 26

1. Bitcoin- BITUSD 2. ETHEREUM- ETHUSD 3. RIPPLE- XRPUSD

Question 27

What are the 4 main trading sessions?

Answer 27

New York, London, Sydney, and Tokyo

Question 28

What time is the forex market open?

Answer 28

23 hours a day, 5 days a week | closed for 1 hour

Question 29

London Session Time

Answer 29

3AM EST to 12pm EST (MOST LIQUID, MOST MOVEMENT)

Question 30

New York Session Time

Answer 30

8AM EST to 5PM EST

Question 31

Sydney Session Time

Answer 31

6PM TO 2AM EST

Question 32

Tokyo Session Time

Answer 32

7PM TO 3AM EST

Question 33

When is the best time to trade?

Answer 33

When NY and London overlap occurs between 8:00 AM ET and 12:00 PM ET.

Question 34

When are the biggest movements in the 4 major currency pairs (EUR/USD, GBP/USD, USD/JPY, and USD/CHF) seen?

Answer 34

On Tuesdays, Wednesday, and Fridays before 12pm EST

Question 35

Technical Analysis

Answer 35

- Price action (charts) | - looks at historical price movements to determine the current trading conditions and potential price movements

Question 36

Fundamental Analysis

Answer 36

Looks at economic, Political, Social News (basically anything besides charts) that affect the fluctuation of a price/asset

Question 37

What is the whole purpose of trading?

Answer 37

To make predictions based on previous movements and speculation

Question 38

What is a buy?

Answer 38

- You are speculating that the quotation price is going to increase from where the current price is - Buy = price goes high

Question 39

What is a sell?

Answer 39

- You are speculating that the quotation price is going to decrease from where the current price is - Sell = price goes to hell

Question 40

Example: What does buying GBP/USD mean?

Answer 40

Buying means the BASE is increasing. You believe the GBP is a stronger currency. Because of this, you are buying the GBP in expectation for the dollar to decrease in price.

Question 41

Example: What does selling GBP/USD mean?

Answer 41

Selling means the BASE is decreasing. If you believe the GBP (base currency) will weaken against the US dollar, you would execute a SELL GBP/USD order.

Question 42

If the USD was the BASE currency, as the dollar increases, what happens to the U.S. dollar indexes?

Answer 42

The U.S. dollar increases as well 1. DXY Increase 2. USD/XXX ex USD/JPY, USD/CHF increase 3. US Indexes ex NAS100, US300, SPX500

Question 43

If the USD was the QUOTE currency, as the dollar decreases, what happens to the U.S. dollar indexes?

Answer 43

The U.S. dollar decreases

Question 44

Negative Correlation Example

Answer 44

When these Increase: XXX/AUD XXX/GBP XXX/USD These will Decrease: AUD/XXX GBP/XXX USD/XXX

Question 45

Negative correlation with the dollar

Answer 45

1. DXY Increase | 2. AUD/USD, EUR/USD, GBP/USD Decrease

Question 46

Bid Price

Answer 46

- The best available price at which you (the trader) can sell to the market - This number will be the lower number

Question 47

Ask Price

Answer 47

- The best available price at which you can buy from the market - This number will be the higher number

Question 48

Spread

Answer 48

The difference between the bid and the ask price