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Forex trading has gained extensive popularity in the contemporary world especially with the advent of online trading. Trading in currencies has become one of the lucrative ways of making money. Most individuals especially novice traders usually have several question about the market and in this article we are going to expound on some of frequently asked questions.

What is the Forex Market?

Forex market is a market where currencies are traded. It is the market where traders are able to buy and/or sell, exchange as well as speculate on various currencies. Foreign exchange market is the largest and the most liquid financial market in the world and is made up of central banks, hedge funds, banks, commercial companies, investment management firms, retails Forex brokers as well as investors across the globe. The Forex market rates usually fluctuate from time to time based on existing as well as anticipated macroeconomic conditions.

Is Forex market different from other financial markets?

Most people usually confuse Forex market with stock market but the truth is that they are different. For example, the Forex market is not governed by any central body like is the case for the stocks, options and futures markets. In the Forex market there are also no clearing houses for verifying trades and as such you do not have a panel to refer to in the event of a dispute. All parties in the Forex market trade based on credit agreements. In addition, there is literally no uptick rule in the Forex market as there is in the stock market and there are no limits on the size of your position in the market.

How can I start trading in the market?

Starting to trade in the Forex market is simple but you need to prepare adequately for the same. It is advisable that you start with a demo account to have a grip of the Forex market before opening a real account. Using a Demo account you will be able to gain experience on trading in currencies without the risk of losing your hard-earned cash.

How do I make a choice in regard to the trading platforms?

You need to do a thorough research on various trading platforms to choose the one that works best for you. A good platform should be able to meet your needs as well as priorities. Trading platforms in the Forex market are basically provided by brokers and so you have to make a sound and well calculated decision when you are choosing your broker. The brokers should provide good customer support around the clock as well as a user friendly trading platform. In addition, the Forex brokerage firm should have in-built market analysis to help traders trading in their platform to make appropriate and informed decisions.

What is a pip?

A pip stands for Percentage in Point and is in essence the smallest increment of a trade in the Forex market. The prices are usually quoted to the 4th decimal point and a change in the 4th decimal point is what is typically called the pip. This applies to all major currencies save for Japanese Yen.

In conclusion, the Forex market is a very interesting yet challenging trading platform. It is such a large market such that there is no financial institution or group of investors that can misuse it because there is no single entity that can manage to gain significant control over trading in currencies. This means that the market provides the same opportunities for all investors irrespective of their social standing or background. It is indeed a free and fair market where individuals can making big money or lose in equal measures. It is a market that you have to trend carefully otherwise you may end up losing all your fortune within a short period of time.