Forex currency crosses
What is a forex currency cross?
A currency pair that includes multiple currencies
A currency pair that is traded on the stock market
Which of the following currency crosses involves the British Pound (GBP)?
GBP/JPY
EUR/GBP
AUD/JPY
USD/JPY
EUR/JPY
What is a major forex currency cross?
A currency pair that includes major global currencies
A currency pair that includes minor or exotic currencies
A currency pair that involves high trading volume
A currency pair that has a fixed exchange rate
Which of the following is an example of a minor forex currency cross?
NZD/CAD
EUR/USD
GBP/USD
AUD/USD
USD/JPY
What is a carry trade in forex trading?
A strategy where traders borrow in a low-interest-rate currency to invest in a high-interest-rate currency
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following currency crosses is commonly used for carry trades?
AUD/JPY
NZD/JPY
USD/JPY
EUR/USD
GBP/USD
What is a currency correlation in forex trading?
A statistical measure of how two currency pairs move in relation to each other
A strategy where traders use multiple indicators to confirm trading signals
A strategy where traders analyze economic data to make trading decisions
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
Which of the following statements about currency correlations is true?
Positive correlation means the currency pairs move in the same direction
Negative correlation means the currency pairs move in opposite directions
A correlation coefficient of +1 indicates a perfect positive correlation
A correlation coefficient of -1 indicates a perfect negative correlation
A correlation coefficient of 0 indicates no correlation between the currency pairs
What is a currency swap in forex trading?
An agreement between two parties to exchange principal and interest payments on a loan denominated in different currencies
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about currency swaps is true?
Currency swaps can be used to hedge against foreign exchange rate risk
Currency swaps involve the exchange of notional amounts, not actual principal
Currency swaps are typically short-term agreements with maturities of less than one year
Currency swaps are only used by central banks and large financial institutions
Currency swaps can be used to obtain funding in a foreign currency at a lower interest rate
What is a forward contract in forex trading?
An agreement between two parties to buy or sell a specified amount of a currency at a predetermined exchange rate on a future date
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about forward contracts is true?
Forward contracts are customized agreements between two parties
Forward contracts are traded on organized exchanges
Forward contracts can be used to hedge against foreign exchange rate risk
Forward contracts require the physical delivery of the underlying currencies
Forward contracts have no upfront payment or margin requirement
What is a spot transaction in forex trading?
An agreement to buy or sell a currency for immediate delivery
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about spot transactions is true?
Spot transactions are the most common type of forex transaction
Spot transactions involve the physical exchange of currencies
Spot transactions settle within two business days
Spot transactions can be used to hedge against foreign exchange rate risk
Spot transactions require upfront payment or margin
What is a currency option in forex trading?
A financial derivative that gives the holder the right, but not the obligation, to buy or sell a currency at a specified exchange rate within a certain period
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about currency options is true?
Currency options can be used to hedge against foreign exchange rate risk
Currency options have an upfront premium payment
Currency options provide the right, but not the obligation, to buy or sell a currency
Currency options are only available for major currency pairs
Currency options require physical delivery of the underlying currencies
What is a margin in forex trading?
A collateral deposit required to open and maintain positions in the forex market
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about margin in forex trading is true?
Margin allows traders to leverage their positions and potentially amplify profits
Margin requirements vary depending on the broker and the currency pair traded
Margin calls occur when the account's equity falls below a certain threshold
Margin can also be referred to as leverage
Margin is not required for spot transactions
What is a stop-loss order in forex trading?
An order placed by a trader to automatically close a position at a specified price level to limit potential losses
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about stop-loss orders is true?
Stop-loss orders are used to limit potential losses
Stop-loss orders can be set at a specific price level or as a percentage of the entry price
Stop-loss orders guarantee execution at the specified price level
Stop-loss orders can be adjusted as the trade progresses
Stop-loss orders are only applicable to long positions
What is a take-profit order in forex trading?
An order placed by a trader to automatically close a position at a specified price level to secure potential profits
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about take-profit orders is true?
Take-profit orders are used to secure potential profits
Take-profit orders can be set at a specific price level or as a percentage of the entry price
Take-profit orders guarantee execution at the specified price level
Take-profit orders can be adjusted as the trade progresses
Take-profit orders are only applicable to short positions
What is a trailing stop in forex trading?
A dynamic stop-loss order that automatically adjusts as the market price moves in favor of the trade
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about trailing stops is true?
Trailing stops are used to protect profits and limit potential losses
Trailing stops can be set at a specific distance or percentage from the current market price
Trailing stops only move in one direction, trailing the market price as it moves up
Trailing stops can be adjusted manually by the trader
Trailing stops are not applicable to long-term trades
What is a position size in forex trading?
The number of lots or units traded in a forex transaction
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about position sizes is true?
Position sizes can be adjusted based on the trader's risk tolerance
Larger position sizes result in higher potential profits and losses
Position sizes are always fixed and cannot be changed once a trade is opened
Smaller position sizes result in lower potential profits and losses
Position sizes should be determined based on proper risk management principles
What is a margin call in forex trading?
A notification from the broker to deposit additional funds into the trading account to meet margin requirements
A strategy where traders buy and sell currencies rapidly to profit from short-term price fluctuations
A strategy where traders use technical indicators to predict future price movements
A strategy where traders analyze economic data to make trading decisions
Which of the following statements about margin calls is true?
Margin calls are triggered when the account's equity falls below a certain threshold
Margin calls require the trader to deposit additional funds into the trading account
Margin calls can lead to the automatic closure of positions to reduce the risk of further losses
Margin calls are only applicable to long positions
Margin calls can be avoided by properly managing leverage and position sizes
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