Lesson 2 – What is Forex

Required for the forex course

Forex account: free account at Markets.com

Duration per lesson: about 10 minutes

Forex actually means “FOReign Exchange”, which is the international name for currency trading. When asking yourself: “what is forex” you should not think about exchanging money at the border office before going on vacation … Instead, forex traders trade extremely large positions which they often sell within a day, with various purposes. Some trade purely to speculate on small price changes, while others use it to hedge their portfolio. Nevertheless, you can also trade in forex with only a small capital. That is because only the actual price gains and losses are settled on your account; you do not actually have to deliver the purchased or sold positions.

 

The forex market is completely virtual. There is no forex exchange building where 23-year-olds are shouting to sell Dollars or Euros. Everything is happening digital and decentralized, without a central supervisor. In addition, the forex market is open 24 hours a day, five days a week. This means that everyone can trade in forex from his own comfortable chair at any time he likes. Globally, currency trading is mainly driven by banks, followed by multinationals and governments. But in recent years forex trading has become very popular among individual traders as well.

Why can you make money with forex trading?

The value of currencies is constantly changing, both with respect to the past and with respect to other currencies. For example, the value (purchasing power) of 1 US Dollar in 2011 was very different from the value of the same Dollar in 1985. And the value of the US Dollar compared to, for example, the Euro has changed considerably in recent years. The latter – the value of a currency relative to other currencies – is crucial in the forex market, because currencies are always traded in pairs. An example, of such a pair is EUR / USD.

The change in value of currency pairs is not entirely arbitrary. It is caused by fundamental developments in the economy and by the actions and reactions of investors. And both are predictable (to a certain extent). If you are better able to predict these developments than others, you can make money on the Forex market.

This course for beginners (as well as in other articles) is aimed at providing you with the knowledge and tools to learn to predict the foreign exchange market, to develop a strategy that suits your own personality and to manage your growing trading capital. In short, we provide the means to develop yourself into a successful forex trader.

However, eventually you will have to do most of the work yourself. In addition to this forex course, we provide in-depth forex articles, a quiz to test your knowledge, and reviews of the best Forex brokers. But it is up to you to use this knowledge, have discussions about it with likeminded people and above all to practice a lot. That is the only way to becoming a successful forex trader.

Lesson 1 – Why Forex: “The Turtles”

Lesson 2 – What is Forex

Lesson 3 – Interpreting Forex prices

Lesson 4 – How to open a forex position

Lesson 5 – News and rumours

Lesson 6 – Fundamental and technical analysis

Lesson 7 – Forex and psychology

Lesson 8 – Ten trading tips for beginners