In this tutorial, we will be highlighting the forex market or the global money market, which is one of the terms we hear a lot on the internet.
What is a forex or foreign exchange market?
Forex or FOREX is an abbreviation for the currency market, which means the foreign exchange market, and is also symbolized by the abbreviation FX.
Forex, one of the most famous financial markets, is a huge financial market where the currencies of countries are bought and sold for various purposes among millions of investors, banks, and mutual funds, the most important of which is to take advantage of the stock exchange. Make profits from exchange rates and trading.
The development of forex trading is due to the advancement of technology and the spread of the internet and modern communication tools and the forex market is a decentralized market with no geographical boundaries as it is traded using the OTC system or outside the platform.
How did the forex market start? birth of money
Forex started based on the principle of barter, where in the past people practiced trading by exchanging goods with each other as there were no coins or notes. Trade such as snails, precious stones, etc. in commercial transactions, so the value of methane is determined by a certain number of these media, such as buying meat for four snails.
And soon these media were replaced by pieces of gold, silver, and precious metals, then people turned to use paper money as an alternative to gold and silver so that banknotes that indicate a certain amount of gold are printed and this is the emergence of money as we know it today.
What is the trading volume in the forex market?
The forex market is the largest financial market in the world reaching $6.6 trillion each day in April 2019, equivalent to 25 trillion Saudi riyals per day. Forex cannot be compared to any other financial market in terms of liquidity, for example, the New York Stock Exchange, the largest stock exchange in the world, has a daily turnover of $70 billion.
Who trades the forex? What is the reason for the large liquidity?
This great liquidity in the foreign exchange market is due to the presence of different classes of traders such as large investment banks, central banks, mutual funds, investment management companies, brokerage firms, individual traders, and non-financial traders. In addition to the development of online communication and trading tools, as well as the use of financial possibilities or leverage for forex trading, this is what attracts more and more investors to the foreign exchange market day by day.
Advantages and disadvantages of forex trading and is forex trading right for you?
- The most important features of the foreign exchange market
- Great liquidity and high trading volume in forex
- This trading is open 24 hours & 5 days a week
- Decentralized Forex Trading - OTC
- Easy to follow the forex market and limit currency news
- The chance of taking profits during both the rising and fall of currencies
- Opportunity to trade small amounts thanks to leverage
Disadvantages of the foreign exchange market
- The degree of volatility and price activity
- high risk
- Weakness of the supervisory or regulatory authority
When can forex be traded?
The forex market is a decentralized market that operates all over the world through various means of communication, without a specific geographical location as a trading center. . The forex market is traded in four main periods: the trading period in America, Europe, Asia, and Australia, so trading does not stop during the day as these periods overlap each other and continue into the next day.
What currencies are there in the forex market? What is the meaning of currency pairs?
What curencies are traded in forex? As we explained before, forex is the foreign exchange market, so traders trade in the currencies of countries, the most famous of these currencies are the currencies of major countries with economic weight, and attention is paid to eight currencies, as is often the case. The most important and most traded currency among the world's currencies is:
- The American Dollar
- EUR - the common currency of the European Union.
- GBP - the currency of England.
- JPY - Japanese currency.
- Australian dollar AUD - Australian currency.
- New Zealand dollar NZD - New Zealand currency.
- Canadian dollar CAD - Canadian currency.
- Swiss franc CHF - the currency of Switzerland.
What basic forex information do you need to know before you start trading forex?
Before trading forex, there is the basic information you should know its meaning:
- Forex trading currency pairs
- The spread, spread, or difference in the buying and selling price
- What is a pip or pip and how do you calculate profit and loss in forex?
- The method of buying and selling forex, the size of the deal, and the contract
- What are leverage and margin in forex?
- What is a margin call or margin call?
How do you start currency trading?
The currency trading market is a huge market that anyone can use and you can easily start currency trading by opening an investment account with a forex company or a brokerage house brokerage companies provide convenience for individuals or the so-called leverage or margin trading. They are allowed to trade in large volumes compared to the invested capital. For a person to trade forex:
First: Learn the basics of forex trading and the most important forex trading terms.
Second: Learn how you can use the forex trading platform
Third: Learn how to analyze forex movement and currency rates.
Fourth: learn capital management in forex.
Fifth: Create a forex trading plan.
Sixth: Trade with a demo account before trading with real money.
Seventh: Choosing the best forex broker and then opening a real account.
Is currency trading profitable? What are the risks of currency trading?
Currency trading is more flexible than stock trading in terms of risk. A trader in the foreign exchange market can get very high returns when he decides to increase the risk further because currency trading is usually done using a leverage and margin system, which doubles the amount of money traded compared to its real value.
This is what causes the risks of investing in the foreign exchange market. Therefore, before you begin, you must make sure that you are well versed in currency trading and that you are only trading with excess money.