FOREX Trading Quiz Questions And Answers

The currency pair GBP/JPY represents the exchange rate between the British Pound (GBP) and the Japanese Yen (JPY). In a currency pair, the base currency is the currency that is being quoted first. Therefore, in this case, GBP is the base currency.

If you have gone long, it means that you have bought the base currency and expect it to increase in value. Going long is a term used in trading, specifically in the foreign exchange market, to indicate that you have taken a bullish position on a currency pair. By buying the base currency, you are essentially betting that its value will rise relative to the quote currency. This is typically done with the expectation of making a profit from the price appreciation of the base currency.

The correct answer is "Double bottom". A double bottom is a reversal pattern commonly found in technical analysis. It occurs when a stock or asset price reaches a low point, bounces back up, then falls again to a similar low point before reversing its trend and starting an upward movement. This pattern is typically seen as a bullish signal, indicating that the downtrend is ending and a new uptrend is beginning.

The correct answer is "Head & Shoulders." The Head & Shoulders pattern is a reversal pattern commonly used in technical analysis. It is formed by three peaks, with the middle peak (the head) being higher than the other two (the shoulders). This pattern indicates a potential trend reversal from bullish to bearish and is often used by traders to identify selling opportunities.

A double top is a bearish reversal pattern that occurs after an extended uptrend. It is formed when the price reaches a resistance level twice and fails to break above it, creating two peaks that are approximately equal in height. This pattern suggests that the buyers are losing strength and the sellers are gaining control, indicating a potential trend reversal from bullish to bearish.

Price itself is the number one indicator because it is the most basic and fundamental factor in determining market movements. Price reflects the supply and demand dynamics of a particular asset and provides valuable information about the market sentiment. Traders and investors analyze price patterns, trends, and support/resistance levels to make informed decisions. Other indicators such as Stochastic, Bollinger bands, and Momentum rely on price data to generate their signals, making price itself the primary indicator.

A market order is an instruction given to a broker to buy or sell a security at the prevailing market price. It is executed immediately and is not limited to a specific price. Therefore, the correct answer is "An order to buy at the market price."

A LIMIT order is an order to buy or sell a security at a specific price or better. It allows the trader to set a maximum purchase price or a minimum selling price for the trade. This means that the order will only be executed if the market reaches the specified price or better. It provides traders with more control over the execution price of their trades, ensuring that they do not pay more or receive less than their desired price.

If your broker has a 100x margin ratio, it means that you only need to have 1% of the position value in your account to open that position. In this case, to have a position of $10,000, you would only need $100 in your account.

The correct answer is "Tripple bottom". A triple bottom pattern is a bullish reversal pattern that forms after a downtrend. It consists of three consecutive troughs at a similar price level, with the middle trough being the lowest. This pattern indicates that selling pressure is decreasing and buyers are starting to step in, potentially leading to a trend reversal and a new uptrend.

PIP stands for "Percentage in Point" or "Price Interest Point". It refers to the smallest unit of measurement used to express the change in value between two currencies. In the foreign exchange market, PIP represents the minimum movement or fluctuation in the price of a currency pair. It is typically measured as the fourth decimal place for most currency pairs, except for the Japanese Yen pairs where it is the second decimal place. PIPs are important for calculating profits and losses in forex trading and determining the spread or commission charged by brokers.

The standard lot size refers to the standardized quantity of currency units that are traded in the foreign exchange market. In this case, the correct answer is 100,000 currency units. This means that when trading in the forex market, a standard lot size corresponds to 100,000 units of the base currency. It is important to note that the lot size can vary depending on the currency being traded, but in this scenario, it is fixed at 100,000 currency units.

If you have a short position, it means that you have sold the base currency and bought the counter currency. This means that you are betting on the base currency to decrease in value relative to the counter currency. This is a common strategy used in forex trading to profit from falling currency prices.

The correct answer is 10,000 currency units. The term "MINI LOT size" refers to a specific amount of currency units that can be traded in the foreign exchange market. In this case, the mini lot size is 10,000 currency units. This means that when trading in mini lots, the trader would be buying or selling 10,000 units of the currency pair being traded.

The BID price refers to the price at which you can sell the base currency. In foreign exchange trading, the base currency is the currency being sold or exchanged for another currency, known as the counter currency. Therefore, the BID price represents the value at which you can sell the base currency in order to obtain the counter currency.