What is forex?

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Introduction:

Forex is one of the largest financial markets in the world and various currencies are traded in it. The volume of transactions in the forex market is very high. In fact, the different currencies of the world are exchanged in this platform so that buying and selling and transactions are formed in different fields, including various goods and services. In forex, one currency is converted into another currency and the exchange rate is also known. The exchange rate of different currencies in the world depends on the transactions and trends that are formed in the transactions of this market. What is the most important and indicative operation and activity in the forex market? Convert different currencies to each other. In the following, we will talk more about what Forex is and what actions are taken in it. If you want to get to know forex in simple language, we suggest that you stay with us until the end of this article.

Familiarity with forex; What is forex?

What is the forex market and what transactions are carried out in it? The forex market, which is actually derived from the term Foreign Exchange Market, is a market for buying and selling different currencies of the world. In this market, transactions are made to convert currencies to each other. These exchanges are also used during the transaction of all kinds of services and goods. Transactions proceed by buying one currency and selling another currency. A wide range of traders are engaged in forex trading. Different currencies of the world, from dollars and yen to other items, are exchanged in this market.

Trading rates for exchanging different currencies in Forex are determined based on supply and demand. These rates are a reference for carrying out various financial transactions in the world. That is why the forex market is very important and eyes are always staring at it. Since the rates of different currencies in forex are determined based on the supply and demand flow, it is considered a dynamic and constantly changing market. Fluctuations in currency prices bring profit and income to traders in this market.

An example of forex trading

If we want to explain about forex trading a little more simply, we need to say that you have to trade in currency pairs in this market. By buying one currency, you sell another currency. This movement is a type of capital circulation and an effort to make a profit.

Suppose someone trades the EUR/USD currency pair in Forex. For example, he bought this currency pair at the price of $1.0589 for one euro. By spending the said amount, this person managed to get one euro. Euro to dollar and dollar to Japanese yen currency pairs have the most frequent transactions in forex.

Learn all about Forex and its history

In order to know what the forex market is and how it works, it is good to have a look at the history of forex to get a more detailed view of the transactions and operations in it. When the Second World War ended, the world was struggling with many problems, the main ones being the lack of economic stability and financial market turmoil. In order to organize the aforementioned chaotic situation, mechanisms were needed to take control of the situation. For this reason, an agreement was signed between the countries known as Bretton Woods. According to this contract, the exchange rate of currencies against gold was determined, but this method was not efficient. Why? Because the economic growth of different countries was diverse and in practice, such a solution would not be effective. By abandoning this contract, the ground was prepared for the emergence of forex.

In 1971, the forex market began to operate based on the supply and demand system. With the development of the Internet and communication in the 90s, the growth of transactions and activities of different strata in this market from various parts of the world increased. Talking about forex, we realize that we are facing a platform full of opportunities and chances of profit.

Who works in the forex market?

Most likely, you would like to know who is active in the forex market. We must say that this market, with the volume of approximately 7 thousand billion transactions per day, welcomes the activity and presence of a wide range of traders. Forex market operators are as follows:

big banks;
commercial companies;
governments and central banks;
retail traders

Big banks

Banks have a very active presence in the forex market, and a large volume of daily transactions is formed in this platform due to their presence. Different banks pursue diverse transactions both for themselves and in line with their investment goals, and also participate in trading and foreign exchange activities of the forex market as a representative of their clients.

commercial companies

Many large and multinational companies need transactions with various currencies to carry out their various affairs. Therefore, they operate in the forex market for their financial and currency exchanges.

Governments and central banks

The famous banks of the world, including the Central Bank of England or the Central Bank of America known as the Federal Reserve, are also active in forex. These financial centers are present in forex to transfer their foreign exchange reserves and by manipulating bank interest rates, they lead to fluctuations in currency rates in the forex market.

retail traders

A large number of active players in the forex market are retail traders and natural persons. This group of people, by being present from different parts of the world in Forex, conducts currency transactions. The fluctuating nature of the market also helps them to make a profit.

What are the working hours in the forex market?

The forex market is active at all hours of the day and night. This market operates 24 hours from Monday to Saturday. To operate in this market from Iran, you must be ready from around 12:30 on Monday morning and know that you can operate until 12:30 on Saturday. Statistics show that the volume of transactions in forex is very high, and in this field, it has managed to steal the competition from the hands of the world’s largest currency trading markets. About 6 to 7 thousand billion dollars are traded daily in forex. The volume of transactions in this platform is very large.

Various departments are active in the Farkash market; Their activity time is also stated based on GMT:

American market ( US Session ); The activity starts from 16:30 to 21:00
Asian Market ( Asian Session ) ; The activity starts from 8:00 to 16:30
European Market ( European Session ) ; Start of activity from 0:00 to 8

Surveys show that the largest volume of forex transactions occur during the active periods of the American and European markets. Considering the mentioned times, the best time of activity for Iranian forex traders is between 10 am and 10 pm. Each person should decide on the most optimal time based on the trading strategies he has in mind and his conditions.

What are the characteristics of the forex market indicator ?

So far we have said what Forex is and how it works. Forex, as a famous and dynamic market that has the largest volume of daily transactions in the world, shows prominent features:

Round-the-clock activity and constant dynamics that increase trading and investment opportunities.
Having a high leverage credit, which means that anyone can start trading without having to have a high capital by paying a small share of the volume of each transaction. You can start trading with an amount much more than your capital and account without the need for bank guarantee and interest. For example, if you have $2000, you can make a $200,000 transaction with a leverage ratio of 1:100. Whenever the loss of your trading position exceeds 2 thousand dollars, the trade will be closed automatically.
Benefiting from the unit for measuring changes in currency pairs, during which the parity rate of currencies is calculated up to several decimal places.
Definition of a concept called spread, which is the difference between bid and ask prices. Spread is the fee paid by users for the transaction.
The definition of the trading volume measurement unit or lot (lot) which is equal to 100,000 units of the base currency in the transaction and in most currency pairs is equivalent to 10 dollars of profit or loss per transaction.
Calculation of the profit and loss of the trading account, which is calculated by taking into account the changes in currency pairs and based on the volume of transactions at the moment, and is deducted from or added to the accounts.

What are the currency pairs traded in forex?

Three general types of currency pairs are traded in the forex market. What is meant by currency pairs? It means currencies that are traded and exchanged with each other. The price of each currency in Forex is defined by another currency. If we want to explain more clearly, we have to expand this topic with an example; For example, the price of the euro against the dollar determines its value; That is, how many euros should be paid for each dollar.

What are the categories of currency pairs in the forex market:

main currency pairs; One of the pairs is the US dollar. Most of the forex transactions are done with these currency pairs.
Sub-currency pairs ; One of the pairs is not dollar and other currencies.
unusual currency pairs; Pairs consisting of a major currency and a country’s currency are developing.

As we said before, we must emphasize that one of the most important currency pairs that are traded in the forex market are the Japanese yen and the US dollar. Another important currency pair in this market is the British pound and the US dollar. Other important and popular currency pairs in forex exchanges are US dollar/Australian dollar and US dollar/Canadian dollar. Look at the currency pairs:

EUR/USD (parity level of the euro against the dollar)
GBP/USD
USD/CHF
USD/JPY (USD/JPY exchange rate)

What are the different trading methods in the forex market?

People engage in trading in the forex market in different ways:

day trading;
Oscillating trading;
investment.

Day trading

In this method, transactions are completed within a few seconds or minutes. Traders in this style and context try to influence the company in a trading process every day by identifying opportunities.

Oscillating trading

Some people advance trading in the forex market by identifying strong positions to enter a trading platform and exit when the price rises.

investment

There are also traders who want to invest in the financial markets with a long-term perspective. These people are not looking for quick profits and are trying to achieve profits and income in the long term.

What are the characteristics of successful Forex traders?

No matter which trading method you choose to use in the forex market, you must have certain characteristics to be successful. As:

risk management;
Benefit from an expert professor;
Benefiting from dynamic and continuous information and knowledge.

What are the benefits of working in the forex market?

Activity in the forex market can bring many positive points. For example:

There is a very high level of liquidity in the forex market.
The volume of transactions in this market is very high and the possibility of success in profitability is very high.
The opportunity to enter or exit positions is possible in a fraction of a second.
By benefiting from different indicators and analysis, you will get profit.
This market is active and providing services around the clock.

What are the disadvantages of working in the forex market?

Participation in any financial and economic activity is associated with the possibility of risks. Forex activity can also be associated with the following disadvantages and risks:

Moving forward with some transactions requires careful assessment of the situation to ensure its legality in different parts of the world.
Prices reach a rate for trading based on the mechanism of supply and demand, and such a situation takes away the stability of the market.

To work in the field of the global Forex exchange, you must have acquired enough information and know what strategies and tactics you are going to use to reach your goal. It is not allowed to be reckless in this field and it can end up at the cost of losing capital and incurring exorbitant costs.

How to trade in forex?

How does forex trading work? What should you do to advance Forex trading and what path should you take? To trade in this market, like the stock market, the help of brokerages should be used. Forex transactions are done through brokerage companies. These companies are connected to each other through interbank channels, and in fact, they are intermediaries and agents who are placed between the seller and the buyer and connect them together.

The activities of brokers are also supervised by institutions called regulators. In fact, regulators are supervisory organizations that are careful to control the trading process and the presence of brokers in the forex market and monitor them so that illegal and fraudulent actions do not take place. Among these regulatory institutions around the world, we should mention the following:

NFA (USA)
FCA (UK)
FINMA (Switzerland)
BaFin (Germany)
Mifid (European Union)
ASIC (Australia)
FMA (New Zealand)
CySEC (Cyprus)

In the Middle East, the countries of Cyprus and the UAE provide a platform for the presence of brokers. European brokers are among the most popular options for conducting transactions and are considered the most productive in this field.

What should be done to start working in the Forex market?

As mentioned earlier, transactions in forex are carried out by brokers. Brokers are intermediaries between traders and the forex market and connect them to each other.

Different types of brokers are active in forex. Brokers are called brokers in Latin. There are several types of brokers:

Market maker or MM
Main market broker (no dealing desk) or NDD
Broker direct processing of orders (straight through processing) or STP
Direct optimal order processing broker (Electronic Communications Network) or ECN

Market maker or MM

These brokers are not related to the main core of the forex market. They determine the transaction rate and market margin themselves. In fact, the Bazarsaz company is the broker of your transaction and they do the transaction with a fixed fee. Such brokers are less reliable than others, but in any case, many transactions, especially for Iranian users and traders, are carried out by these brokers. The reason Iranian users rely on market brokers is the presence of various sanctions.

Main market broker ( no dealing desk ) or NDD

If you cooperate with the main market brokers, your trading account will be connected to the global system. In this process, the fee rate is not fixed and everything is based on supply and demand. This style of trading has two subcategories called STP and ECN, which we will deal with in the form of independent brokers.

Broker direct processing of orders ( straight through processing ) or STP

In this style of trading, every purchase and sale request is made based on the agreed details and the prices are in accordance with the global market rate. There is no waste of time and orders are connected to the central system.

Direct optimal order processing broker ( Electronic Communications Network ) or ECN

These brokers offer the best transaction prices to users. In fact, the orders are based on the best demand in the market. In this style of transactions, the fees do not have a fixed rate.

How to choose a broker and start trading in forex?

In the first step of starting your forex trading activities, you should choose a suitable broker so that you can trade with it. A contract is concluded between you and the broker, and the activity process begins by depositing the money you want to trade with to the brokerage account. As a result, the work steps are as follows:

Choosing the right broker;
depositing the desired amount of the transaction to the brokerage account;
opening a deposit in the name of the customer;
Receive the password and username of the customer’s account to operate through the brokerage’s online trading software.

Choosing the right broker

To choose the right brokerage, you should pay attention to several points:

The security of the brokerage is high and it has not shown an inappropriate history in the field of security. In addition, it must operate under the supervision of regulatory bodies.
The broker’s fee is not high and the transaction is cost-effective for you.
The brokerage has effective and appropriate support. For example, be available around the clock.

Deposit the desired amount of the transaction to the brokerage account

You must have an international account to deposit and withdraw from the brokerage account. In this case, everything will go smoothly. However, this is not possible for many users. There are other methods:

Using credit cards such as Mastercard and Visacard, which are not easy for Iranians to obtain, and involve risks.
Using virtual wallets to charge the account, such as Web Money and Perfect Money.
Getting help from exchanges is another way. Of course, the exchange must be approved by the broker.
Recharging the account through agents and people who are connected with the broker is another way to recharge the account of Iranian users.

By going through these steps, any brokerage client can conduct currency transactions with the online trading software of any broker. In the software, it is possible to carry out the following actions:

Receiving pre-purchase requests;
Receive pre-sale requests;
Linking transactions of goods and currencies.

Each broker has its own trading software and provides special features to its users. Brokers receive a trading fee (spread) in exchange for these services.

Buying and selling transactions are done in the forex market like any other market. If we want to talk more precisely about these, it is necessary to tell you about their terms:

Purchase transactions known as long
Sales transactions called sell

By entering a buy position in trading, you buy the base currency and, in return, sell the other currency in the currency pair. As the value of the base currency increases, your trade will make a profit.

By entering a sell position in trading, you sell the base currency and, in return, buy the other currency in the currency pair. If the value of the base currency decreases, your trade will enter profit.

It is also necessary to define the two concepts of profit limit and necessity in forex trading:

profit limit ( take profit ) ; Whenever you enter a trade and are moving in the direction of positive market changes, you should also be aware of the exit point. Consider a point as an exit and stop taking profits, because the market is not always with you and it is possible that the profitable trend will reverse.
loss limit ( stop loss ); Sometimes when you enter a trade, the market is not with you and you should know at what point of loss to exit the market trade.
win rate ( win rate ); This rate and percentage is also called the number of successful transactions that you have obtained in a certain period of time. For example, if with a strategy you were able to win 80 out of 100 trades in a certain period, that means your win rate is 80%.

What is a practice or demo account ?

Brokers consider practice or demo account for their users. These accounts allow users to practice a little and get to know different parts of the business before entering the risky world of real investing. If you intend to work in forex, it is better to practice in these accounts first to understand what you are going to face.

It is possible to invest in forex with very small amounts and this reduces the risk of transactions. However, it is better to train and prepare yourself for real trades in a suitable volume by taking help from facilities such as demo accounts. Sometimes starting an activity without practice and even with small amounts of capital does not lead anywhere and causes quick loss and immediate failure in initial transactions.

How much does forex trading cost?

You should know that the cost of transactions in this market is lower than other markets. The main cost in the forex trading process is the amount paid to the broker under the name of commission or spread.

When it comes to the cost of forex trading, we need to look at two other concepts and terms:

commission ( commission ) ; Based on the transaction, its volume and the liquidity of the account, an amount is deducted from the trader. After performing various operations by the clients, a commission fee is received from the brokerage for providing services. This fee will be deducted from the account of the trader or the same user. The amount of commission or fee is determined in proportion to the type and volume of the transaction.
swap ( swap ) ; If the transaction is postponed to the next day, this amount will be deposited or deducted from the account depending on the difference in the interest rate of the currency or the underlying asset. If the transaction is not done at the same time and remains open until the next day, an amount called swap is deducted or added to the user’s account.

It should be remembered that transaction fees are determined depending on the conditions and services of brokerages. Different brokers or brokerages have different policies and approaches to attract the attention of traders and help to promote trades in different ways.

What is the method of registering different orders for Forex trading?

It is possible to determine the type of orders in Forex. There are two types of order registration methods:

Order based on current market price (Market Execution)
Pending Orders

Order based on current market price

These orders and transactions proceed based on the current market price. In fact, you should see what the price of your desired order is at the moment of buying or selling and pay and receive accordingly.

Conditional statements are different. Buying and selling in this style is based on a special condition. In more precise terms, when the purchase or sale is settled and the final result is reached when the specified condition is met.

There are 4 types of conditions in this type of order:

stop buying or buy stop ; The purchase order is stopped if it is higher than the market price.
sell stop ; The sell order is stopped if the price is lower than the market rate.
limit of buying position ( buy limit ) ; The purchase order is placed if the rate is lower than the market price.
limit of selling position ( sell limit ); A sell order is placed if the rate is higher than the market price.

How to determine the volume of the forex transaction?

What is the method of choosing the trading volume in Forex trading and how should you organize this part of the work? To determine the volume of transactions in forex, a unit called lot is used:

Each standard lot is equivalent to 100,000 units of base currency.
Each minilot is equivalent to 10,000 base currency units.
Each microlot is equivalent to one thousand units of base currency.
Each nanolot is equivalent to 100 units of base currency.

If you intend to register a buy or sell order in the forex market, your transaction volume must be at least 0.01 lot. In some cases, it is possible to do transactions in smaller volumes.

Another unit that is used in determining the volume of forex transactions is pip and point:

Pips and points are the units of forex market volatility.
Each point is equal to one-tenth of a pip.

The price of different currencies is calculated up to 5 decimal places. From the fourth digit onwards, it is called pip. This is a little different for the Japanese yen.

For example, if EUR/USD moves from 1.1050 to 1.1054, this 0.0004 increase in price is equivalent to one pip. Calculating the dollar value of a pip is important and can affect the process of making a profit or loss in a trade. The dollar value of a pip is not fixed and is determined by the market price.

To calculate the pip value, you must follow the following procedure:

Divide one pip or 0.0001 by the current market price.

What are the different analysis methods to operate in the forex market?

Two types of analysis are used for trading activities in different financial markets, including the forex market. These include the following:

technical analysis

Technical analysis is based on the information seen in the price charts. There are different styles of this analysis, including the following:

classical analysis;
harmonic patterns;
Elliot waves;
Price action.

In technical or technical analysis, the future rates are evaluated by examining the history and past of the prices. Various price charts including line charts, bar charts, candlestick charts, area charts, range charts, etc. are used in this context.

Fundamental analysis

In fundamental analysis, environmental and market conditions are used in macro dimensions to reach conclusions regarding the prediction of actions and prices. Among the factors that are used in fundamental analysis, we should mention factors such as interest rate, unemployment, inflation, etc.

It is interesting to know that a combination of fundamental and technical analysis is used to predict the situation of the forex market. This type of analysis, which is known as technofundamental, examines the market from both sides. For example, the occurrence of a problem in the American economy will have negative effects on the dollar, and it is obvious that the currency pairs in the forex that are teammates with this currency will also fall. So far fundamental analysis has been used to assess the situation. Now we can identify opportunities to use these conditions to buy or sell with technical analysis techniques.

How much is Forex income?

The main goal of any economic activity is to achieve profit and income. But how much is the income of forex trading? Is it possible to get rich in this way? Before any economic activity, you should know the market well and master your situation. Do you start trading in forex with extra money and a budget in excess of the necessary amounts of your life? Do you have a small budget and just want to get rich overnight? Where are you in your financial life? Activity in any financial market is faced with many risks. Forex is no exception to this rule. In addition, no success is achieved quickly and easily.

Therefore, you should know that participating in this market as a trader requires spending time, learning carefully and using the right references to be aware of the ins and outs of trading. Don’t forget to identify authentic learning resources and references that will help you take the shortcut. Many courses and applicants for training in this field are scammers, and you must be very careful to follow up on the situation.

With all this, the income from forex can be very significant and high. Achieving huge profits from forex trading is not at all unlikely and strange. In a market with a very high volume of transactions, such a trend is quite normal. Of course, everything depends on the amount of investment, volume of transactions and people’s decisions.

How to enter forex in Iran?

After reviewing everything about forex, it is time to review the way to enter this market for Iranian users. You can enter this market and start trading by registering in one of the brokers available for trading in forex. Unlike the digital currency market, Forex does not restrict Iranian users. In fact, various digital currency exchanges usually prevent Iranian users from operating due to sanctions, but there is no such thing for forex brokers. Of course, there are problems on the way to the activity, and charging the user account and depositing money are facing obstacles that can be solved and we talked about them before.

The process of forex activity is briefly as follows:

Learning the basics of trading in Forex;
choosing a broker;
Practicing with a demo or practice version of a user account in the brokerage;
providing capital to enter the trading world;
definitive registration in the brokerage and creation of a user account;
Recharging the user account with an appropriate method;
Start trading.

at the end

Entering the world of Forex trading is not a difficult task, but it requires accuracy and the use of sufficient and appropriate references and resources. If you can equip yourself with accurate and correct information in the field of trading and use the right tools in this field, your activities will be accompanied by profit and satisfaction. Take learning and smart entry into the forex world seriously. If you enter the forex market with the correct steps and a strategic view, you will see favorable results and achieve big profits. Don’t forget to persevere, learn and access reliable educational resources.

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