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 FAQ
(Frequently Asked Questions)
What is Foreign
Exchange?
The Foreign Exchange market, also referred to as the
"FOREX" market, is the largest financial market in the world, with a
daily average turnover of approximately $1.5 trillion. Foreign
Exchange is the simultaneous buying of one currency and selling of
another. The world's currencies are on a floating exchange rate and
are always traded in pairs, for example EUR/USD or USD/JPY.
Why haven't I heard of Foreign
Exchange?
The answer is simple: the currency market was
simply financially inaccessible to the general population of
investors and traders, and the minimum account requirements were
beyond the resources of the average investor. Since then, the
situation has changed dramatically. Now under new bank regulations,
instead of a minimum investment of $200K, accounts can be opened for
$10 - $50K.
Who are the participants in
the FOREX Market?
The FOREX market is called an
'Interbank' market due to the fact that historically it has been
dominated by banks, including central banks, commercial banks, and
investment banks. However, the percentage of other market
participants is rapidly growing, and now includes large
multinational corporations, global money managers, registered
dealers, international money brokers, futures and options traders,
and private speculators.
When is the
FOREX market open for trading?
A true 24-hour market
begins at 7 p.m. Sunday evening through 3 p.m. Friday EST. FOREX
trading begins each day in Sydney, and moves around the globe as the
business day begins in each financial center, first to Tokyo, then
London, and New York. Unlike any other financial market, investors
can respond to currency fluctuations caused by economic, social and
political events at the time they occur - day or night.
What are the most commonly traded currencies in the
FOREX market?
The most often traded or 'liquid' currencies
are those of countries with stable governments, respected central
banks, and low inflation. Today, over 85% of all daily transactions
involve trading of the major currencies, which include the US
Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian
Dollar and the Australian Dollar.
What
is Margin?
Margin is a faith deposit for each opened
position. This deposit is used to secure a position within the
market and is added to or deducted from when profits or loss is in
effect, then returned to the account when positions are
closed.
How are currency prices
determined?
Currency prices are affected by a variety of
economic and political conditions, most importantly interest rates,
inflation and political stability. Moreover, governments sometimes
participate in the FOREX market to influence the value of their
currencies, either by selling their domestic currency in an attempt
to lower the price, or conversely buying to raise the value of their
currency. This is known as Central Bank intervention. Any of these
factors, as well as large market orders, can cause high volatility
in currency prices. However, the size and volume of the FOREX market
makes it impossible for any one entity to "drive" the market for any
length of time.
How much money do I need
to open a FOREX trading account with Pinnacle
Exchange?
Pinnacle-Exchange offers both self-traded and
dedicated managed accounts. The minimum deposit for a self-traded
account is $1,000. Managed accounts require a minimum of
$10,000.
Is Foreign Exchange as risky as
everyone thinks?
One way to measure risk is to compare a
financial product's risk relative to its return. If you take the
time to compare an investment in FOREX to common investments such as
equities and fixed income, you will find that from a risk/reward
standpoint, FOREX investments provide respectable returns and should
be considered viable portfolio diversification tools.
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F.A.Q