Forex Trading Test 5

Question 1

What is the name of the analysis based on national economic news?

Accepted Answer

Fundamental analysis

Answer

Fundamental analysis involves evaluating a currency's value by examining economic, social, and political factors that could affect its supply and demand. This includes analyzing national economic news such as interest rates, inflation, GDP growth, employment data, and geopolitical events. It contrasts with technical analysis, which focuses solely on price charts and indicators.

Question 2

What are direct currency pairs?

Accepted Answer

When quoted currency is USD

Answer

A direct currency pair is typically defined from a domestic perspective, where the value of one unit of a foreign currency is expressed in terms of the domestic currency. In a global context, especially for many non-USD domestic currencies, a direct quote often refers to pairs where the USD is the quoted currency (e.g., EUR/USD, GBP/USD). This convention shows how many units of the quoted currency (USD) are needed to buy one unit of the base currency.

Question 3

What does trading long in the forex market mean?

Accepted Answer

To initiate a buy order

Answer

In financial markets, 'going long' or 'trading long' means to buy an asset with the expectation that its price will rise. In forex, this specifically refers to initiating a buy order for a currency pair, anticipating that the base currency will appreciate against the quoted currency. It is the opposite of 'going short,' which involves selling.

Question 4

How much margin is needed to trade 20 lots of the EUR/USD pair if the margin for each lot is $1,000?

Accepted Answer

Answer

Margin is the amount of money required to open and maintain a leveraged position in the forex market. To calculate the total margin needed for 20 lots, you simply multiply the margin required per lot by the number of lots. Therefore, 20 lots multiplied by $1,000 per lot equals a total margin requirement of $20,000.

Question 5

What does trading short in the forex market mean?

Accepted Answer

To initiate a sell order

Answer

'Going short' or 'trading short' in the forex market means to sell a currency pair with the expectation that its price will fall. This implies anticipating that the base currency will depreciate against the quoted currency, allowing the trader to buy it back at a lower price later and profit from the difference. It is the opposite of 'going long,' which involves buying.

Forex Trading Practice Test

Forex Trading Practice Test

Forex Trading Test 5