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What is Forex?
A question that generates curiosity among many individuals wishing to experience forex, but the lack of knowledge in addition to a lot of false and inaccurate information transmitted among individuals made those wishing to try this field in a state of uncertainty and the question of what is Forex remained unanswered, and the word Forex is an abbreviation for Foreign Exchange, which means currency exchange or currency exchange rate, which is any currency other than the local currency used in settling international transactions. It is also called foreign currency, or a system for trading and converting the currency of one country into the currency of another country, and during the article, we will learn about what Forex is.

Forex history

The exchange and trading of currencies appeared in ancient times, and the exchange and trading of currencies had four stages historically, starting from ancient times to modern times, and getting to know what Forex is in ancient times and how currency exchange was at that time will lead to a deeper understanding of what Forex is today, currency and exchange were among the elements The task of trade in the ancient era, which enables people to buy and sell items such as food, pottery and raw materials, and if a Greek currency consists of more gold than an Egyptian currency because of the size or content, the merchant can obtain a greater number of Egyptian currency through barter as The merchant would pay less Greek for the Egyptian, or for more physical goods, and at some point in history, most world currencies today in circulation had a fixed value in a quantity specified by a recognized standard such as gold or silver.

In the Middle Ages and onward during the fifteenth century, the Medici family was required to open banks in foreign locations in order to exchange currencies to facilitate trade. During the seventh or eighteenth century, Amsterdam maintained the activity of the forex market, and in 1704 AD, foreign currencies were exchanged between agents working for the Kingdom of England and the Province of Holland. In the same year, before World War I, countries abandoned the monetary system, the gold standard.

In the modern era, in the journey to learn what Forex is between 1899 AD to 1913 AD, countries’ holdings of foreign currencies increased at an annual rate of 10.8%, while gold holdings increased at an annual rate of 6.3% between 1903 AD to 1913 AD, and in London, specifically in 1902 AD, there were only two brokers to exchange Foreign exchange, bringing the number of brokers to 17 between 1919 and 1922. In 1924, the number of brokers reached 40 companies working in trading. In 1944, the Bretton Woods Agreement was signed, which allowed currencies to fluctuate within ±1% of the currency exchange rate. In ending the Bretton Woods agreement and fixed exchange rates to US President Richard Nixon which led to the free-floating currency system.

As for what is Forex after 1973, the control of countries over foreign exchange trading in developed countries ended in 1973, and some sources claim that the first time that currency pairs were traded was by retail clients in the United States in 1982, on January 1, 1981, AD As part of the changes that began in 1978 AD, the People’s Bank of China allowed some local establishments to participate in foreign exchange trading, and at some point in 1981 AD the South Korean government ended forex controls and allowed free trade for the first time, and the interventions of European banks and the German Central Bank specifically affected the market Forex on February 27, 1985 AD, and the largest percentage in all global trading in 1897 AD was in the United Kingdom.

What is Forex

The answer to the question of what is Forex or as it is also called the foreign exchange market or the forex market will be in stages, this market is a system for exchanging the currency of one country with the currency of other countries, and the forex markets actually consist of many different markets, because trading between currencies Individual markets (such as the euro and the US dollar) each constitute a market. The foreign exchange or forex markets are the original and oldest financial markets and remain the basis for the rest of the financial structure. Foreign exchange markets provide international liquidity, preferably with relative stability, a market Forex is available 24 hours and is an over-the-counter (OTC) market, meaning that deals are made between two participants by means of communication technology.

Currency markets are also divided into spot markets (which are for two-day settlements), forward and swap markets, and interbank futures. Foreign exchange trading is dominated by London, New York and Tokyo, as the forex market is the largest and most liquid financial market, and figures issued by the Bank for International Settlements show that the volume of The daily global trades in the forex market is in the billions of dollars, and the original demand for foreign currencies arose from the requirements of traders for foreign currency for trade settlements in addition to the requirements of trade and investment, and the buying and selling of foreign currencies are also done to manage risk, balance and profit from speculation, and thus cash flows are not traded factor The principal who determines the exchange rate of currencies, for example, interest rate differentials act as a magnet for return-based capital, and thus currency markets are often a permanent and ongoing referendum on government policy decisions and the health of the economy.

As for what is Forex for traders and those wishing to enter this field, it is a market in which different national currencies are traded, and this market does not have a central location, that is, it is a decentralized market. the Forex market is an digital community of banks, agents, establishments and man or woman traders, maximum of whom exchange thru agents or banks. “And many entities, from financial institutions to individual investors, have currency needs, and it is also possible to speculate on the movement of the currency pair in a certain direction by deciding to buy or sell the currency, as workers in this field implement the order to buy or sell currencies on the network in order to be able to interact with Requests for other currencies from other parties, the forex market is available 24 hours a day, five days a week, and the market is closed on Saturdays, Sundays and public holidays, and in a country such as the United States, for example, it may be an official holiday, but the forex market remains open but with fewer cash flows and movement, The price is weak.
What is Forex
What is Forex

Forex learning rules

After getting to know what Forex is and before entering this field, you must familiarize yourself with the rules of forex trading, and among the rules associated with what is Forex are currency pairs. Replacing the US dollar with the Euro two currency pairs are shared, and in all forex transactions one must exchange one currency for another this is why the forex market uses currency pairs so that the trader can see the cost of one currency in relation to another currency, for example, the EUR/USD price allows to know the number of dollars Which requires you to buy one euro, and the forex market uses symbols which must be known to know what Forex is to refer to currency pairs as each currency has its own symbol.

The currency of the euro is denoted by the symbol EUR and the US dollar USD, so the euro-dollar pair shows EUR/USD, and among the common currency symbols are the British pound, GBP, the Swiss franc CHF, the Australian dollar, and the Japanese yen, JPY, and each currency pair in the forex will have a market price associated with it, The price indicates how much money is required from the second currency to buy one unit of the first currency and this point is important to know what Forex is, for example, assuming that the price of EUR/USD is 1.1055, this means that buying one euro requires paying 1.1055 dollars, To find out how many euros it takes to buy 1 dollar, flip the pair “invertible on the trading platform” and divide 1 by the current price of the dollar, in the previous example 1 divide 1.1055 and the result is 0.90, this means that buying 1 dollar requires paying 0.90 euros based on the current market price Currency rates are constantly changing 24 hours a day due to transactions and trades that take place all over the world.

Another rule to know what is Forex is market pricing, as learning forex trading requires familiarization with a set of new terms that describe the price of currency pairs, and once they are understood and know how to calculate profit from trading, the trader is one step away from the first trade. of currency pairs moving approximately 50 to 100 pips per day (sometimes more or less depending on market conditions), pip is the acronym for Point in Percentage and is the name used to refer to the fourth decimal position in a currency pair, or the second decimal position when The Japanese yen is in the pair, for clarity and for a deeper understanding of what Forex is, when the EUR/USD price moves from 1.1060 to 1.1120, this movement is 60 pips, so if the trader bought the pair from 1.1075 and sold it at 1.1120, he would have made a profit of 45 pips.

The profit made in trading depends on the amount of currency purchased. If 1,000 units were purchased and it is called a micro lot, then each pip equals $0.10. In this case, the profit from trading is calculated as 45 pips x $0.10 = $4.5. Buying 10,000 units is called a mini lot, then each pip equals $1 and the profit, in this case, is $45. As for what is called a standard lot, which is buying 100,000 units, each pip equals $10, and therefore the profit on 45 points is $450, given that The trading account is in US dollars and the account can be in euros or sterling, for example, and the point value is slightly different if the US dollar is the first currency and for the Japanese yen pairs, the trader can review the calculation of the point value for different types of currency pairs and the account currency.

For trading purposes, the first currency included in the pair “the base currency” is the directional currency on the forex price chart, and in the case of EUR/USD if the price is moving in an upward direction, this means that the value of the Euro is rising against the US dollar, but if the price is moving in a downward direction It means that the value of the Euro is depreciating against the US Dollar, and the demo account also called paper-trading account is one of the best ways to learn how prices move in real-time in forex because the trader is trading and opening deals with fake money, and many brokerage firms offer Free demo account This account works in exactly the same way as the real account and without risks, and it is often recommended to use the demo account to hone your trading skills before starting real trading.

Forex trading platforms

To complete the knowledge of what is Forex, we will learn about the most prominent forex trading platforms, as the MetaTrader platform, known for its acronym MT4 or MT5 versions, is the most popular and widely used by online forex traders. It is an electronic trading platform, released and developed in 2005 AD by MetaQuotes. Software, where this platform is used to identify currency rates and charts, add buy or sell orders, account management, as well as tools to assist in technical analysis of the financial markets. This platform is licensed for forex brokers to be presented to their clients. This platform is on a computer or on a mobile phone so that he can follow his account at any time and any trader can operate the platform on both the computer and the phone. Stocks and commodities, but the MT4 platform were more widely used. In 2011, the number of companies using the MT5 platform was only 50 compared to more than 40 0 companies use the MT4 platform, and the trading platform supports many languages.

Types of analysis in forex

After learning about what Forex is, trading rules and platforms, the analysis will be introduced to Forex, where Forex analysis looks at changes in the market. Trading in addition to individual traders to determine the best trading for the target currency pair, the types of analysis are:

Fundamental Analysis

The fundamental analysis depends on the current factors affecting the economy of countries, where traders follow economic and financial factors and other relevant qualitative and quantitative factors. In fundamental analysis, traders follow factors such as the country’s inflation rate, interest rates, GDP and other economic indicators, where traders look Especially when making decisions, higher interest will attract more investors which will increase the value of that country’s currency over time.

Technical Analysis

Technical analysis relies on past price movement data to predict the future value of a currency. Traders focus on the price movement chart and many analysis tools to assess the strength or weakness of the target pair or target commodity. The trader in technical analysis examines the prices of specific currencies over time. In most cases, the trader will recognize recurring patterns, which he will then use to predict the market movement. In automated technical analysis, a computer program analyzes the history of currency price movement, and the value of the currency tends to fluctuate in somewhat predictable patterns, technical analysis is the most common type in Forex analysis, and sometimes sentiment analysis can be considered as forex analysis.

Advantages of trading in forex

What is Forex has been identified and the advantages of this field will be recognized, the forex market operates on 24 hours and it does not matter the location of the trader or the time in which the trading process will start, as the trader can enter through the platform installed on the computer or phone at any time he wants to complete the trading, and one of the advantages of forex is also the financial leverage, which simply means lending the money needed to conduct the trading process according to the terms of the forex, and this money is loaned through the trading broker “the trader does not actually get the money, but it is a system in forex to double the capital so that the trader can double the capital By a certain amount and with a prior agreement with the broker”, the financial leverage is a great advantage in the forex market.

The micro account can be used for trading in large volumes where a large profit can be obtained from a small capital, and important advantage is the control and reduction of risks on the trading account. It is the most dangerous, and there are no commissions on trading. The trader pays price differences that depend on the amount of trading per point and on the currency pair traded. The program and the data provided are a free service and the trader is not obligated to any costs, and all the trader has to do after choosing the broker Download the program from During entering the broker's website, and after installing the program "the platform", the chart is displayed and all that is needed for trading as soon as you log in.

Forex trading risks

Despite the advantages of Forex, there are some risks that the trader must take into account. Knowing what Forex is without knowing what the risks are is like an incomplete equation, as any failure on the Internet or in the device used will affect the existing trades, so the trader must know that these things can happen during the trading process, and since the trader can trade in large volumes, it is possible to enter large trades that the portfolio cannot bear, and in the event that the deal is contrary to expectations, it will lead to the loss of his money, so the trader must activate the stop-loss order to reduce the risk.

Also, the current issues within the foreign and local economies can change in a moment and thus directly affect the price movement in the forex, an example of this is the attack on Saudi Aramco on Saturday, September 14, 2019 AD during the forex market holiday, as oil prices opened up nearly 700 points after the opening of the forex market, Therefore, the trader must keep abreast of all the issues and how they may affect the forex markets, and one of the biggest risks is also the financial leverage. To empty the portfolio, it is always advised to use a time of loss order, trading on margin is also a risk with high levels that the trader should avoid.

forex education books

It is not possible to know what Forex is overnight, and it is not possible to know what Forex is by just reading the heads of the pens. The forex market is a wide field and many books have been issued to teach and define what Forex is. Forex, but a lot of reading and reading makes a solid information base, and it is a book that helps to understand what Forex is.
  • How to Make a Living Trading Foreign Exchange: Courtney Smith's book How to Make a Living Trading Foreign Exchange begins with an introduction to the world of forex explaining how the market works, but most of this 2010 work is dedicated to making money, and offers six strategies for earning a steady income through trading, plus for important risk management techniques and its refusal rule strategy.
  • Japanese Candlestick Charting Techniques: Steve Nison's book Japanese Candlestick Charting Techniques provides an extended in-depth education on candlestick patterns, which are also used in futures, scalping, hedging, stocks, and anywhere else technical analysis can be applied, ideal for research traders On developing their own trading strategy, he is credited with the techniques of Japanese candlestick patterns by offering a versatile technical analysis tool.
  • Forex Trading: The Basics Explained in Simple Terms: Jim Brown's Introduction to Forex is a book geared towards giving beginners to the field the basics, some of the basics, tips for choosing a broker, forex definitions, forex markets, entry and exit strategies, and science. Self in trading, the style of the writer who is a forex trader is clear and concise.

Broker selection tips and tricks

After you have fully familiarized yourself with what is Forex and what are the advantages, risks and rules of Forex, you should learn about the methods of choosing a trading broker, there are Forex brokers all over the world and since the Forex market is not highly regulated in some areas, there are a lot of fraudulent and barefoot brokers One of the principles, when looking for a forex broker, one of the main things to look at is the regulation and the age of the broker in the market, as the broker must be regulated in a major market such as the United States, Britain or New Zealand, for example.

In conclusion, it is preferable to choose brokers with a long track record as there are always new brokers that appear and disappear quickly, and the trader should keep in mind what he is looking for in the broker as some traders care about the value of fees and trading costs and others care more about customer support, The main things to consider are the fees charged by the broker, most of the brokers do not charge for the platforms that are offered to the clients, many brokers only charge the spread fee without any other fees, some brokers may charge a fee but the spreads are much lower.
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