What Is Forex? How to Start Forex Trading and the Benefits

The FX market or forex is a decentralized global marketplace, where the world's currencies are constantly changing hands. Exchange rates change every second so the market is constantly changing.

Only a small proportion of currency transactions take place in the real economy, which involves international trade and tourism. Therefore, most people buy or sell currency transactions for speculative reasons.

Are you interested in starting forex trading? Check out this article first, OK!

Forex definition

Forex or (FX) comes from the word foreign market exchange, or the foreign exchange market in Indonesian. Foreign exchange in this case is a process, namely changing one currency into another, with a specific purpose.

Currency traders, buy currencies in the hope that they will be able to sell them at a higher price later. This is the meaning of forex trading, namely seeking profit through the difference in sales that occur in the foreign exchange market.

Generally, this act of changing currency has a trading purpose, to tourism.

How to Start Forex Trading

If you are interested in forex trading, the first thing you should do is thoroughly study forex. Although not very complicated, forex trading is a job that requires deep understanding.

There are many online courses that offer affordable classes on forex trading, you can start by searching and doing research through these classes.

Then, you need to set up a broker account. The forex broker will not charge a fee for this. Instead, they make their money through the spread/pip that lies between the buy and sell prices.

Next, develop a trading strategy: While it can be difficult to keep track of market movements, with a strategy you will find it easier to determine how you should trade.

Therefore, after you start trading, always pay attention to how your position is nearing closing.

Currently, there is software that informs you how your daily position is, and you can more easily monitor it.

Advantages of Forex Trading

Forex trading offers interesting advantages, one of which is easy for beginners to understand. So, here are various advantages if you choose to participate in forex trading.

Huge Global Market

The foreign exchange market is huge, with traders joining from all over the world. Therefore, the importance of the foreign exchange market is evident from the exchange of currencies, as much as 4 trillion USD every day. 

Friendly For Beginners

Beginner traders who want to invest small, can easily start forex trading. Many brokers provide demo accounts, therefore, brokers can test their skills first in market simulations, before actually making transactions.

Continuously Open Market

Given that the forex market is global, trading can take place almost continuously as long as the market is open somewhere in the world. This market operates five days a week, 24 hours a day. 

Liquidity

Due to the large volume of trading activity that occurs around the clock, it is the most liquid market in the world. Liquidity refers to the ability of an asset that a trader can buy, or sell, with little effect on its value.

In the case of the forex market, liquidity allows you to trade with minimal risk.

No limits

Unlike the stock market, the foreign exchange market has no restrictions on directional trading. Since traders always buy or sell currencies according to market conditions, you can easily enter a buy or sell position depending on your prediction of changes in its value.

Low transaction fees

A small capital is enough to start trading forex online, Transaction costs consist mostly of brokerage fees, which it earns from spreads. Spreads are measured in pips or points as a percentage, which is the difference between the ask and bid prices.

That's what you need to know about Forex. Don't forget to consider the advantages and disadvantages before investing, OK?