What is Forex? A comprehensive beginner's guide in  2023

What is Forex? A comprehensive beginner's guide in  2023

What is Forex? A comprehensive beginner's guide in  2023

Forex, as the largest trading market in the world, allows for the trading of foreign currencies for various reasons, including tourism and international trade. Additionally, it provides an opportunity for individuals to trade specific foreign currencies and currency pairs. 

However, it requires Forex trading knowledge for beginners interested in participating. At the same time, it is important to familiarize oneself with all the terms used in the Forex trading market and choose a reliable Forex broker in global trading markets. 

Moreover, several tips should be followed to minimize losses and ensure profitability in the largest global trading markets. Through our website "salyou," we will provide a comprehensive explanation of what Forex is, especially for beginners who are looking to achieve gains and make profits.

Elements of the article:

• What is Forex?
• How does Forex trading work?
• Steps to create a Forex trading account
• Steps for Forex trading and major currencies
• Best Forex brokers for beginners
• Major Forex trading markets worldwide
• Major financial centers for Forex trading worldwide
• Major currencies for the Forex trading market
• Major currency pairs for Forex trading worldwide
• Important Forex trading terms to know
• How to read Forex charts for beginners
• Choosing a Forex trading system for beginners
• Tips for beginners in Forex trading
• Advantages of Forex trading
• Disadvantages of Forex trading

What is Forex?

Forex is the trading of foreign currencies or the exchange of one currency into another. Forex is a global decentralized financial market for foreign exchange, where trading takes place within any open market to achieve profits. 

Moreover, this market is open for buying and selling foreign currencies five days a week, 24 hours a day. Furthermore, this market is used by corporations, banks, hedge funds, investment companies, and retail traders. 

Meanwhile, the global sales and trading volume of this market exceed 6.5 trillion U.S. dollars per day. It is worth mentioning that electronic trading (OTC) occurs through computer networks among traders worldwide, and participants in the Forex trading market include investment banks, commercial banks, institutions, and retail investors.

How does Forex trading work?

Forex trading is based on buying and selling foreign currencies and their pairs in the global market. On the other hand, the Forex market is constantly changing due to daily and second-by-second exchange rate fluctuations. At the same time, Forex traders aim to make money through active speculation by buying or selling currency based on its future direction. For example, buying or selling the US dollar, Japanese yen, or British pound.

Steps to create a Forex trading account:

You can start trading Forex and foreign currencies by buying and selling by following these steps:

1. Open a real account by visiting the official website of CMC Markets. Or visit the official website www.forex.com and open an account by entering all the required information.
2. Then select your country from the list.
3. Click on "Get Started."
4. Choose English or Chinese language and continue.
5. Enter your email address and password.
6. Choose trading via CMC Platform or Meta Trader 4.
7. Choose the account type between MT4 CFD: Trade foreign currencies, indices, commodities, and cryptocurrencies on the most popular core system. Or MT4 FX Active: Trade foreign currencies on a commission-based and zero-spread basis for major currency pairs, which is the most suitable option for Forex trading.
8. Click on "Continue."
9. Enter the numeric code sent to your email address.
10. Then click "Confirm" to proceed after confirming the trader's email address.

Steps for Forex trading and major currencies:

After creating a Forex trading account on one of the trading platforms, you can start trading by following these steps:

1. Choose a reliable and secure Forex broker.
2. Deposit funds, speculate on price differences, or start trading contracts for differences on the selected major currency pair.
3. Choose currency pairs, including major, minor, and exotic pairs, which offer the highest Forex offers.
4. Build a trading strategy for buying or selling based on price increases or decreases.

Best Forex Broker for Beginners:

A beginner Forex trader must choose a reliable and secure Forex broker. The most important platforms are:

IG - Best Forex Broker for Beginners:

IG is considered the best Forex broker for beginners in terms of education and is the most trusted platform for trading with many important features, including:

• Offers a variety of educational resources.
• Provides a smartphone application for learning.
• The minimum deposit is 250 GBP.
• Offers 19,537 tradable instruments.
• Provides competitive prices.
• However, it lacks charting on the main platform and has a limited product range on MT4.

Avatrade - Best Forex Broker for Beginners:

AvaTrade is a globally trusted brand offering many features in the Forex trading market, including:

• Provides educational resources and content for beginner traders.
• The minimum deposit is 100 USD.
• Offers 1,260 tradable instruments.
• Has the AvaOptions mobile application.
• However, it has average pricing for retail accounts and an outdated design with a slow-loading desktop platform.

Capital - Best Forex Broker for Beginners:

Capital platform provides a range of educational resources for beginners and various features, including:

• Offers video tutorials, articles, and comprehensive lesson programs.
• Provides the Investmate smartphone application for learning.
• The minimum deposit is 20 USD.
• Offers 6,000 tradable instruments.
• However, it does not offer MT5.

eToro - Best Forex Broker for Beginners:

eToro is considered the best Forex broker for copy trading with important features, including:

• User-friendly Forex broker.
• Offers the eToro smartphone application.
• Provides diverse educational resources such as articles and videos.
• Offers 3,458 tradable instruments.
• The minimum deposit ranges from 10 to 10,000 USD.
• However, it lacks an automated trading strategy and has mandatory trading limits.

Plus500 - Best Forex Broker for Beginners:

Plus500 platform provides access to a comprehensive range of contract for difference (CFD) instruments with many features, including:

• User-friendly Forex broker.
• It is a globally trusted platform for beginners.
• Offers 2,800 tradable instruments.
• The minimum deposit is 100 EUR.
• However, it has limited advanced tools for active Forex traders and lacks educational and research resources.

CMC Markets - Best Forex Broker for Beginners:

CMC Markets platform is considered one of the best online trading platforms for beginners due to the following features:

• Excellent Forex broker for beginners.
• Provides an excellent smartphone application.
• Offers diverse educational resources such as articles, videos, webinars, and podcasts.
• Offers 12,377 tradable instruments.
• Trading can be done without a minimum deposit requirement.

XTB - Best Forex Broker for Beginners:

XTB platform offers excellent research and education as a Forex broker for beginners, with important features including:

• Trusted and multi-asset Forex broker.
• Provides outstanding customer service.
• Offers comprehensive educational content and market research.
• Provides the innovative xStation 5 trading platform.
• - Offers 12,000 tradable instruments.
• Trading can be done without a minimum deposit requirement.
• However, it has average pricing.

The main markets for Forex trading in the world are:

Forex trading occurs in the world within three main markets:

• Spot markets.
• Futures markets.
• Forward markets

Forex Spot Markets:

The Forex spot markets are the largest among all markets dedicated to Forex trading. Additionally, they serve as the underlying asset for futures markets and forward markets.

At the same time, the buying and selling of foreign currencies occur in this market based on their current trading price. It is a bilateral transaction where one party delivers a predetermined amount of currency to another party in exchange for a specified amount of another currency at an agreed exchange rate. However, the price is determined by supply and demand, influenced by factors such as:

• Current interest rates.
• Economic performance.
• Ongoing local and global political developments.
• Future performance expectations of one currency against another.

It's worth mentioning that the proliferation of Forex brokers and the emergence of electronic trading have significantly contributed to the strong growth of trading volume in the Forex market.

Forex Futures Markets:

The futures markets (also known as forward markets) tend to be more popular among financial institutions that need to hedge against future foreign exchange risks on a specified date. They represent standardized agreements between two parties to buy or receive a foreign currency on a future date at a predetermined price in the OTC market. However, the trading of futures contracts occurs within trading exchanges, not outside of them.

Forex Futures Markets:

The Forex futures markets are similar to futures markets in terms of popularity among financial institutions for hedging and risk management purposes. However, they differ in the way contracts are bought and sold outside the exchange between two parties who negotiate and agree on the terms. 

Additionally, the trading of futures contracts occurs based on settlement dates and standard sizes in the general commodity market, such as the Chicago Mercantile Exchange (CME).

Similarities between Forex Futures Markets and Forex Forward Markets:

Forex futures markets and Forex forward markets share the following similarities:

• Both futures and forward markets have their settlements in cash at a specific exchange after the expiration.
• Additionally, both allow for the buying and selling of contracts before their expiration.
• They provide risk mitigation when trading major currencies.
• Major Forex companies use futures contracts and forward markets to hedge against future exchange rate fluctuations.
• Moreover, both markets do not involve trading with actual currencies but rather with contracts for a specific currency type, with a specified price for each currency and a predetermined settlement date.

Major Financial Centers for Forex Trading in the World:

Currency trading takes place in the major financial centers for Forex trading worldwide, which include:

• New York in the United States of America.
• Tokyo in Japan.
• London in the United Kingdom.
• Paris in France.
• Zurich in Switzerland.
• Frankfurt in Germany.
• Hong Kong in China.
• Sydney in Australia.
• Singapore in Singapore.

It is worth mentioning that Forex trading continues 24 hours a day for 5 and a half days a week across these centers. Furthermore, Forex trading continues in each time zone, ending in a country like the United States and starting again in countries like Japan and China.

Major currencies for the Forex trading market:

Based on what Forex entails, it includes major currencies for trading in global exchanges, which are:

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

Major Currency Pairs for Forex Trading in the World:

The major currency pairs designated for Forex trading in the world are any currency pair that includes the US Dollar (USD) with another major currency. This is due to the importance and position held by the US Dollar as the largest economy in the world. In addition, traders can choose one of the major currency pairs to conduct their transactions in the Forex market. 

At the same time, the major currencies are the most traded and liquid in Forex, accounting for about 75-80% of market transactions. This is because they have the largest number of sellers and buyers and have small price spreads between buying and selling, making major currency pairs more profitable for trading. Additionally, they can be traded using contracts for differences (CFDs).

Major Currency Pairs for Forex Trading in the World:

There are several major currency pairs for Forex trading, which include:

• Euro and US Dollar: EUR/USD.
• US Dollar and Canadian Dollar: USD/CAD.
• British Pound and US Dollar: GBP/USD.
• US Dollar and Swiss Franc: USD/CHF.
• New Zealand Dollar and US Dollar: NZD/USD.
• US Dollar and Japanese Yen: USD/JPY.
• Australian Dollar and US Dollar: AUD/USD.

Major Secondary Currency Pairs for Forex Trading in the World:

Secondary currency pairs in Forex trading are known as minor currency pairs or cross-currency pairs. In addition, these currency pairs include other groups of currencies and major markets, such as:

• Euro and British Pound: EUR/GBP.
• Euro and Swiss Franc: EUR/CHF.
• British Pound and Japanese Yen: GBP/JPY.

It is worth mentioning that novice Forex traders should focus on one or two currency pairs in the market. However, the most commonly chosen major pairs by traders are the Euro and US Dollar or the Dollar and Japanese Yen. Both of them represent a significant portion of the global daily trading volume due to the availability of resources on the underlying economies of these currencies.

Important Forex trading terms to know:

There are fundamental terms in Forex trading that beginner Forex traders need to be familiar with after understanding what Forex is. These terms include:

• Leverage.
• Lot.
• Contracts for Difference (CFDs).
• Bearish and Bullish Market.
• Margin.
• Pip.
• Forex Broker.
• Spread.

Leverage:

It is the use of borrowed capital to amplify returns, and forex brokers provide this capital to increase the trading volume of their clients. The forex market is known for its high leverage, which traders use to enhance their positions. However, one of the drawbacks is that it can lead to significant financial losses as one of the risks of forex trading.

Lot:

It is the standard size for currency trading, and there are four common sizes: standard, mini, micro, and nano. In addition, the standard lot consists of 100,000 units of currency, the mini lot consists of 10,000 units, the micro lot consists of 1,000 units, and the nano lot consists of 100 units. At the same time, the lot size affects profits or losses, and the larger the lot size, the higher the profits or losses.

Contracts for Difference (CFDs):

CFDs are derivatives that help traders speculate on the price movements of currencies without owning the underlying asset. In simpler terms, traders can buy and sell currencies in large quantities to bet on the rise in the currency pairs' prices by buying CFDs. Conversely, if they bet on a price decline, they sell CFDs.

Bullish and Bearish Markets:

Currency prices decrease in a bearish market, while they increase in a bullish market. Bearish and bullish markets refer to a downward or upward trend in the markets due to economic reasons or unforeseen disasters. For example, financial crises or natural disasters lead to a bearish market, while positive news and optimism for the global economy lead to a bullish market.

Margin:

It is the funds held in a trading account when opening a position and is used alongside leverage. Additionally, margin funds reassure the broker that the forex trader is capable of fulfilling their financial obligations. The amount of trading margin depends on the client's and trader's account balance over some time, and the margin is used alongside leverage.

Pip:

It is the basic unit in the price of a currency pair and equals 0.0001 of the quoted price. One hundred pips equal one cent, and 1,000 pips equal one dollar. Furthermore, the value of one pip changes based on the standard lot size provided by the forex broker. For example, if the bid price for the EUR/USD pair increases from 1.15556 to 1.15566, it represents a difference of one pip.

Forex Broker:

A forex broker is a person or a financial services company that provides traders with access to a platform to buy and sell foreign currencies. If the broker is online, they usually charge a commission for their services.

Spread:

The spread represents the difference between the bid and ask price for currencies. It is the buying and selling price when trading or exchanging.

How to Read Forex Charts for Beginners:

There are three types of charts and graphs in Forex trading that display currency exchange rates:

• Line Charts: Primarily used by traders to identify larger trends and display daily charts. However, they don't provide much detail compared to other chart types.
• OHLC Bar Charts: Each period viewed by the trader is represented by a bar, which shows a vertical bar chart for the trading range of a single day. It is a unique chart as it provides more information than the line chart.
• Candlestick Charts: The most commonly used charts in Forex trading, they offer a wide range of price movement patterns.

Choosing a Forex Trading System for Beginners:

For beginners in Forex trading, there are specific trading systems available, including:

• Currency Scalping: A type of Forex trading that involves buying and selling currency pairs in very short timeframes ranging from seconds to hours.
• Day Trading: Refers to daily trading as a conservative Forex approach suitable for beginners. It focuses on price trends for an hour or four hours, and trades are opened between one to four hours, with a focus on major trading sessions.
• Swing Trading: A medium-term approach to Forex trading, this strategy focuses on larger price movements than day trading or speculative trading. Traders can hold their positions for days to weeks.

Tips for Forex Trading Beginners:

There are several tips for beginners in Forex trading to ensure safe trading and profitability:

• Familiarize yourself with the Forex market and currency pairs and study them thoroughly.
• Develop a trading plan and stick to it to achieve success.
• Create a trading account.
• Base your trades on financial data or technical analysis tools.
• Be prepared to take risks in trading and determine the leverage ratio.
• Use stop orders to exit at your desired price.
• Stick to your plan in case of losing a trade to avoid further losses.
• Reevaluate your trading plan if goals and needs change.

Choose a suitable trading partner in the Forex market who offers competitive rates, customer service, and multiple tools.

Advantages of Forex Trading:

Trading in the Forex market (Forex) offers the following advantages:

• It is a highly active market and the most liquid in the world.
• Additionally, Forex markets have the highest daily trading volume.
• It is the only market that operates continuously, never closing, 24 hours a day.
• At the same time, it is an international decentralized market for foreign currencies, with no single central exchange.
• There are no physical trading locations, but rather a network of communication through trading stations.
• The extensive use of leverage in trading makes it easy to start with a small capital and multiply profits later.
• The foreign exchange market dedicated to Forex trading is more mysterious than other financial markets.

Disadvantages of Forex Trading:

Several drawbacks dominate Forex trading, including:

• Forex markets are volatile, and their fluctuations are more significant than regular markets.
• The risks associated with leverage are significant and can lead to losses.
• Forex markets lack instruments that provide traders with regular income, such as regular dividend payments.
• They attract investors who are not interested in fundamental returns.
• The decentralized nature of the Forex market makes it less subject to scrutiny by regulatory bodies compared to other financial markets.

Frequently Asked Questions:

What is Forex?

Forex is the largest financial market in the world, with billions of dollars exchanged daily based on exchange rates for foreign currencies.

What is the best forex broker for beginners?

Some popular forex brokers for beginners include:

• IG
• AvaTrade
• CMC Markets
• eToro

How do I start forex trading?

Here are the steps to start forex trading:

1. Create a Forex trading account.
2. Choose a reliable forex broker.
3. Deposit funds into your account.
4. Select currency pairs to trade.
5. Build a trading strategy.

What are the major currency pairs for forex trading?

The major currency pairs for forex trading include:

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

What are the forex trading markets?

The forex trading markets include:

• Spot markets
• Futures markets
• Forward markets

In conclusion, forex trading is a comprehensive explanation for beginners, covering the steps to create a forex account, choosing a suitable broker, and important terms to know. 

However, it is crucial to study the market and major currencies well to understand their future trends and avoid significant risks and losses. It is advisable to start with a small amount and gradually increase your involvement as you gain more clarity.

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