What is Forex ? Forex Market- What It Is and How to Start?

Forex is undisputedly the biggest market for trading, and the daily trading volume in it may exceed 5 trillion US dollars, which makes the Forex market and its trading volume equal to at least 3 times the volume of trading in the stock markets worldwide.

The Forex market history goes back to the year 1973 when many countries headed to the floating exchange rate system, meaning allowing the exchange rate of the currency to change according to the demand for it.

What does Forex mean?

Forex is short for Foreign Exchange, the basic idea to be able to make a profit through Forex is to buy a currency at a price and sell it after that when its price increases and the difference between the two prices is your profit.

If you do a deep research at Forex trading, you will see a range of exciting trading chances that are less likely to be found in other trading options.

  If you traveled abroad, you had entered into a Forex deal. Suppose you reside in Britain and decide to go on a tourist trip to France. Therefore, you need to exchange the British pounds you have in euros. 

In doing so, the exchange rate between the two currencies – which in turn depends on supply and demand factors – determines the number of euro units that you will get against your pounds. The exchange rate fluctuates continuously.

What is the difference between the regular stock and the Forex?

Just as with stocks, you can trade Forex according to your personal estimates of the value of this currency (or your expectations for value in the future). However, the main difference for Forex is that it allows you to trade while the value is going up or down as easily.

If you believe that the value of a currency will increase, then you can buy it. If you think that its value will decrease, then you can sell this currency.

What are the common currency pairs? 

All Forex deals involve two currencies because you are betting the value of one currency against another.

Here are the 7 major currency pairs:

  • The Euro/Dollar pair (EUR / USD)
  • The Dollar/Japanese Yen (USD / JPY)
  • The British Pound Sterling/US Dollar (GBP / USD)
  • The US Dollar/Swiss Franc (USD/CHF)
  • The Australian Dollar/US Dollar (AUD/USD)
  • The US Dollar/Canadian Dollar (USD/CAD)
  • The New Zealand Dollar/US Dollar (NZD/USD)

The main subscribers of the Forex trading market:

  • Central banks
  • Commercial banks
  • Financial organizations
  • Governments
  • Individual investors and currency speculators

How to gain experience quickly in Forex?

There are three basic ways to gain experience in currency trading:

  • Read and learn a lot about Forex
  • Communication with trading experts
  • Don’t quit it when you experience losses.

Forex Trading Advantages: 

  • It is open 24 hours and closes only on weekends, and global holidays.
  • Efficient and highly liquid, 
  • Very fickle.
  • Low transaction costs.

How to start Forex Trading?

Here are the easy steps you can follow to start Forex trading:

  • Choose the ideal brokerage company that suits you and offer good options for contracting with it.
  • Open a demo (It is an account for beginners, as the real account in everything except that the capital is hypothetical) or real Forex account then deposit an amount for the company to invest (some companies allow a minimum amount of $100 or 200 and some do not allow less than $1,000).
  • You will have to download the program or App that your broker suggests to monitor the movement of currencies and prices. (Note that: With the large and rapid changes in currencies, you will need to follow the price movement continuously).
  • Give buying and selling orders to the broker through the trading program or app.

How to make a profitable deal?

 We can clarify it with the next case study:

Take EUR / USD, The Euro is the first currency in the pair, which is called the base currency, and the US dollar is the second currency, which is called the counter currency. 

When you see a quote for this pair on the trading platform, the displayed price expresses the value of one Euro expressed in US dollars. You will always notice there are two prices, one for purchase and one for sale. 

The difference between the two prices is called the spread. When you click buy or sell, you are buying or selling the first currency in the pair.

Let’s assume that the value of the Euro will go up against the US dollar. You are trading the EUR / USD pair. Given that the euro is the first currency, and you think its value will increase, then you will purchase EUR / USD. If you see that the value of the euro will decrease against the US dollar, then you will sell EUR / USD

If the EUR / USD purchase price is 0.70644 while the sale price is 0.70640, then the spread is 0.4 points. If the deal moves in your favor (or against you), you will start making profits (or losses) from your deal after covering the value of the spread.

What are online trading companies?

Online trading companies are a mediator between you as a trader and the market and enable you to:

– Opening Forex Accounts

– Pass your buy/sell deals

– Providing you with a trading platform that links to your personal computer on one side and the market.

How to choose the right brokerage firm to work with?

There are some factors to consider when you decide the right company to work with:

First: The Company must operate under a recognized legal umbrella and have the necessary licenses from the relevant official authorities. 

Second: The Company’s trading platform must be responsive and functions smoothly on smart devices.

Third: Customer service must be excellent, 24/7 ready, and available in several languages.

Fourth, providing an account manager to assist you in managing funds.

Fifth: The Company provides various types of accounts to trade through such as demo account.

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