Forex for beginners

3
min read

Forex for beginners

3
min read
Glowing digital passport with currency symbols and 'FOREX' on the cover, symbolising entry into the forex trading world.
Lesson
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Duration
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minutes

Forex might sound a bit intimidating, but it's actually more accessible than you might think. Picture yourself in a bustling international marketplace-not with spices and souvenirs, but with currencies from all over the world!


What is Forex?

Forex, short for "foreign exchange," is simply the process of buying and selling different currencies. It’s the largest and most active financial market in the world, with trillions of dollars traded daily.


Why does the Forex market exist?

Imagine you're an American company wanting to buy products from a Chinese manufacturer. You need to pay them in Chinese Yuan, but you only have US Dollars. That’s where the forex market comes in. It’s a global network of banks, brokers, and institutions that help convert one currency into another.

This exchange happens constantly, all over the world, keeping global trade and investment running smoothly.


How does Forex trading work?

Thanks to modern technology, forex trading is now accessible to everyone through online platforms like Deriv. Here’s the basic idea:

  • Currencies come in pairs: You always trade one currency against another, like the Euro versus the US Dollar (EUR/USD) or the British Pound versus the Japanese Yen (GBP/JPY).
  • You make predictions: Will one currency strengthen or weaken against the other?
  • You buy or sell: If you think the Euro will rise against the Dollar, you “buy” the EUR/USD pair. If it does go up, you sell at a higher price and make a profit. If it goes down, you might take a loss. You can also do the reverse—sell first and buy back at a lower price.


Why trade Forex?

So, what makes forex trading so popular? Here are a few reasons:

  • 24/5 action: Forex is open 24 hours a day, five days a week. You can trade whenever it fits your schedule.
  • Easy in, easy out: It’s a very liquid market, meaning there are always buyers and sellers. This makes it easier to enter and exit trades.

Diversification: Forex can complement your trading portfolio alongside stocks or other asset classes.

Quiz

What is a key characteristic of forex trading?

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The market only operates during business hours
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You trade one currency against another
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Only banks can participate in forex trading
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FAQs

Is forex trading risky?

 Yes, like any financial market, forex carries risks. That’s why having a solid strategy and risk management plan is crucial.

How much money do I need to start trading forex?

You can start with as little as $5 on some platforms. However, it’s best to practice with a demo account first before using real money.

Do I need to trade full-time to be successful?

Not at all! Many traders participate part-time, fitting forex trading into their schedule whenever the market is open.