Forex Trading Exam Questions with Complete Solutions

Forex trading - ANSWER-1. Simultaneous exchanging of one currency for another 2. No physical location or central exchange 24hr trading Customers - ANSWER-1. Corporation, hedge funds, mutual funds, pension funds, central banks 2. Trade with a dealer Dealers - ANSWER-1. Mostly large banks take customer orders 2. Make markets from owned inventory Inter dealer market - ANSWER-1. Direct dealing - dealer to dealer (Phone, electronically) 2. Indirectly (Inter dealer brokers (phone, electronically) Inter dealer markets types - ANSWER-1. Voice 2. Conversational systems 3. Voice broker FX Quotes - ANSWER-1. Exchange rate is the price to buy or sell currency per unit base currency Euro dollar quote 1.185 - ANSWER-Price of 1 euro is 1.185 dollars Forex Quotes American Terms - ANSWER-Base currency is foreign - Euro dollar Forex Quotes European terms - ANSWER-Base currency is dollars - Dollar Yen Non Dollar currency pairs - ANSWER-Cross rates - Euro Yen Exchange rate two way - ANSWER-1. Customers sells at bid price 2. Customer buys at ask price PIP - ANSWER-Smallest quote increment (0.0001) Euro dollar quote 0.8893 - ANSWER-1. Big figure 0.88 2. Pip 93 Settlement - ANSWER-Spot forex trades settle at T+2 Use SWIFT