Forex Trading Forex Trading Fundamentals

Question 1

What does the term 'pip' stand for in Forex trading?

Accepted Answer

Percentage in Point

Answer

A pip stands for 'Percentage in Point' and represents the smallest standard price move in a currency pair, typically the fourth decimal place.

Question 2

Which of the following is the most actively traded currency pair in the Forex market?

Accepted Answer

EUR/USD

Answer

EUR/USD is the most actively traded currency pair in the world, accounting for roughly 20–25% of all Forex trading volume.

Question 3

What is the Forex market's primary function?

Accepted Answer

Enabling currency exchange and price discovery

Answer

The Forex market primarily enables the exchange of one currency for another and provides price discovery for currency values.

Question 4

What is a 'lot' in Forex trading?

Accepted Answer

A standard unit of trade size

Answer

A lot is the standard unit of measurement for trade size in Forex, with a standard lot equaling 100,000 units of the base currency.

Question 5

In a currency pair such as USD/JPY, which currency is the 'base currency'?

Accepted Answer

USD

Answer

In any currency pair, the first listed currency is the base currency; in USD/JPY, the US Dollar is the base currency.

Forex Trading Practice Test