What Is Forex and How Does It Work?
Forex, short for Foreign Exchange, is the world’s largest financial market where currencies are traded. With over $6.6 trillion traded daily, it’s even bigger than the global stock markets combined.
Simple example:
When you exchange Malaysian Ringgit (MYR) for US Dollars (USD) at a money changer, that’s already a forex transaction.
In online trading, this happens through a broker’s platform. Traders speculate on price movements — buying when they expect prices to rise, and selling when they expect prices to fall.
Why Are So Many People Attracted to Forex?
1. Low Capital Requirement
- Start with as little as USD 50.
- Example: With USD 50 and leverage 1:500, you can control trades worth USD 25,000.
- ⚠️ Remember: Higher leverage = higher risk.
2. 24-Hour Market
- Open 24 hours a day, 5 days a week.
- Sessions: Sydney, Tokyo, London, New York.
- Trade anytime, based on your lifestyle.
3. High Profit Potential
- Even small moves can generate profit.
- Example: A 50-pip rise in EUR/USD with 0.10 lot = USD 50 profit.
4. Global Access
- Trade major pairs like EUR/USD or GBP/USD.
- Or try exotic pairs such as USD/TRY or USD/ZAR.
Step 1: Learn the Basics of Forex
Currency Pairs
Example: EUR/USD
- Buy = expecting Euro to strengthen vs USD.
- Sell = expecting Euro to weaken vs USD.
Pips & Points
- 1 pip = 0.00010 = 10 points
- 1 point = 0.00001
👉 Example: EUR/USD 1.10540 → 1.10550 = 1 pip move.
Lot Sizes
- 1.00 lot = 100,000 units (~USD 10 per pip)
- 0.10 lot = 10,000 units (~USD 1 per pip)
- 0.01 lot = 1,000 units (~USD 0.10 per pip)
👉 With USD 100 capital, safest lot size = 0.01 (micro).
Spread
The trading cost — difference between buy and sell prices.
Example: EUR/USD 1.1000/1.1002 = 2 pips spread.
Leverage
Broker’s loan to open bigger trades.
- Example: 1:1000 leverage → USD 100 controls USD 100,000.
Step 2: Choose a Safe Forex Broker
Your broker is the gateway to forex markets. Choosing the wrong one can cost you your money.
Qualities of a good broker:
- Regulated by a trusted authority.
- Reliable platforms: MT4, MT5, cTrader.
- Easy deposits/withdrawals: FPX, debit card, e-wallets.
👉 Example: EMAR Markets offers leverage up to 1:3000, low spreads, and Malay-language support — great for beginners.
Step 3: Open an Account & Start With a Demo
- Live Account: Fill details, upload ID (KYC).
- Demo Account: Practice with virtual funds (e.g., USD 10,000).
- Example: Buy EUR/USD → price rises 100 pips with 0.10 lot = USD 100 profit.
- Start Small: Begin with USD 50–100 after practicing.
Step 4: Learn Basic Market Analysis
Support & Resistance (SNR)
- Support: Price floor where market tends to bounce.
- Resistance: Price ceiling where market tends to reverse.
How to use:
- Buy (Long): Near support.
- Sell (Short): Near resistance.
- Breakout: Price breaks key levels → strong moves.
👉 Analogy: Support = floor (ball bounces up). Resistance = ceiling (ball bounces down).
Step 5: Apply Strong Money Management
- Risk per trade: Max 1–2% of capital.
- Example: USD 100 capital → risk only USD 2 per trade.
- If SL = 20 pips → use 0.01 lot.
- Avoid overtrading when emotional.
- Keep a trading journal for discipline.
Step 6: Keep Learning & Join a Community
Forex is a never-ending learning process.
- Books: Trading in the Zone (Mark Douglas).
- Videos: Forex education channels on YouTube.
- Communities: Join trader Telegram/WhatsApp groups.
- Mentorship: Learn from experienced traders.
Conclusion
Forex offers huge opportunities but also big risks. For beginners, the best approach is:
- Learn the basics.
- Start with a demo account.
- Choose a regulated broker.
- Apply money management strictly.
👉 Want a beginner-friendly broker with leverage up to 1:3000, low spreads, and Malay-language support?
Try EMAR Markets today.
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