Learn what is forex in a simple way
An important question comes to the minds of new traders, which is “what is forex”, and the strangeness of the abbreviation may be the reason for that question, but when you finish reading this article, you will simply discover that you have probably dealt with the forex market many times without knowing it.
WHAT IS FOREX?
We will answer the question of what is forex simply, in the beginning it is important to know that the word forex is the abbreviation of foreign exchange. Forex is the market in which currencies are traded. If you have the Saudi riyal currency and you want to exchange it into US dollars, whether for the purpose of import, travel or otherwise, you have to go to a bank or an exchange company in order to exchange Saudi riyals into US dollars.
This is the traditional use of forex, and the most common use that interests us more as investors is forex trading in order to make a profit, as traders in the forex market trade the so-called “currency pairs”, if you expect that the US dollar will rise in its exchange rate against the euro , the successful investor will certainly convert his possessions of euros into dollars in order to benefit from that expected increase in the exchange rate, which is expressed in the language of the forex market as “selling the euro-dollar pair”.
What are currency pairs in the forex market?
After we know what forex is, we review the idea of currency pairs. Traders trade or trade forex through what is known as “trading currency pairs.” For example, when an investor wants to buy the US dollar against selling the Japanese yen, he buys the USD/JPY pair, which means that he sold the yen and bought the dollar in single operation. To simplify the idea, you can imagine the stock market. In the stock market, for example, if we own X stock and want to buy Y stock, we have to sell X stock first and then buy Y stock, but in Forex we do the two operations in one step.
Does the forex market have daily working hours?
In order to provide an accurate answer to the question of what is forex we must know the difference between it and other markets. Unlike the stock markets, which have specific dates for trading sessions, the forex market does not have daily working hours, as it works 24 hours throughout the day, and therefore the forex market is on the list of money markets in terms of liquidity, as the forex market operates with a trading period system.
For example, there is a trading period for the Asian market, a trading period for the European market, a trading period for the American market, and so on, and due to the time differences between those markets, this makes forex trading available throughout the day. However, there is a weekly holiday for the forex market, which is on Saturday and Sunday.
What distinguishes the forex market from other markets?
One of the advantages of the forex market is that it allows traders to trade over the networks of the OTC (Over The Counter) system, allowing investors to directly access the market and carry out buying and selling operations themselves.
In addition, traders can make profits in periods of market rise or fall. If we expect the euro-dollar to rise (that is, the euro will rise against the dollar), then in this case we can buy the pair and take profit after the end of the rise.
We can also make a profit if we expect the EUR/USD to fall, by selling the EUR/USD (meaning we are buying the dollar and selling the Euro) and thus making a profit after the pair goes down.
How do you start forex trading?
As with other financial assets, all you have to do is open a trading account with one of the trading platforms and download the trading application on your phone or computer, and then start trading directly.
