Forex questions, answered

Pips, leverage, sessions and the dollar: what new currency traders keep asking, answered plainly.

• What Is the Best Time to Trade Forex?

  For most major pairs, liquidity is deepest when London and New York are both open, roughly 8 a.m. to noon New York time, so spreads are usually tightest then. The market runs 24 hours a day on weekdays, but quiet hours and the weekly open often bring wider spreads.

• What Moves the US Dollar Index (DXY)?

  DXY tracks the dollar against six currencies, with the euro making up about 58% of it. It mainly moves with interest-rate differences between the US and other economies, relative growth, global risk appetite and trade flows. When DXY rises, EUR/USD usually falls.

• How Much Leverage Should I Use in Forex?

  Use far less than the maximum. US rules cap retail forex leverage at 50:1 on major pairs and 20:1 on others, and the EU caps it at 30:1. At 50:1 a 2% move against you wipes out your margin. Most of your risk should be controlled by position size and stop-loss, not by how much leverage a broker offers.

• Why Do Most Forex Traders Lose Money?

  Regulators who studied retail CFD accounts in Europe found that 74% to 89% typically lose money. The main reasons are high leverage, trading costs that add up with frequent trades, and behavior such as overtrading and cutting winners early while holding losers.

• What Is a Pip in Forex and How Much Is It Worth?

  A pip is the standard unit for a currency price move: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen. Its dollar value depends on trade size: on EUR/USD one pip is worth about $10 on a standard lot of 100,000 euros, $1 on a mini lot and $0.10 on a micro lot.