Forex for beginners: Your passport to the world's largest financial market

Forex might sound a bit intimidating, but it's actually a lot more accessible than you might think. Think of it like stepping into a bustling international marketplace – except instead of spices and souvenirs, you're dealing with currencies from around the globe!

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What is Forex?

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Forex, short for "foreign exchange," is simply the process of buying and selling different currencies. It's the biggest and most active financial market in the world, where trillions of dollars change hands every day. 

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The purpose of the foreign exchange market

Imagine you're an American company wanting to buy some products from a Chinese manufacturer. You need to pay them in Chinese Yuan, but you only have US Dollars. This is where the forex market comes into play. It's a global network of banks, brokers, and institutions that help you swap your Dollars for Yuan.

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This exchange is happening constantly, all over the world. It's what keeps global trade and investment flowing smoothly.

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How does Forex trading work?

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Thanks to modern technology, forex trading is now accessible to everyone through online platforms like Deriv. The basic idea is straightforward:

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1. Currencies come in pairs: You always trade one currency against another. For example, the Euro versus the US Dollar (EUR/USD) or the British Pound versus the Japanese Yen (GBP/JPY).
2. You make predictions based on your analysis: You decide if one currency will strengthen or weaken against the other.
3. 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, well, you might lose some money. Vice versa, you can also sell at a higher price and then buy when it falls down at a lower price.

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But why trade forex?

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Good question! Here are a few reasons why forex trading is so popular:

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• 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.

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Get started trading Forex today

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While forex trading isn’t complicated, it does require some knowledge and practice. Plenty of resources are available to help you get started. Deriv even offers an online trading academy and demo accounts, so you can try trading with virtual money before risking your own hard-earned cash.

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Delve deeper into the world of currency pairs and how they work in our free forex course and get a free practice trading account to put your learnings to the test.