what is forex

Introduction Forex

Foreign exchange or what is commonly called forex is a foreign currency exchange transaction. This term is better known as foreign exchange or foreign currency in Indonesian. The occurrence of this foreign currency exchange is none other than because of the need for this foreign currency, such as trips abroad, shopping for goods from abroad, and so on.

Besides the need for non-profits, some people trade forex with the aim of making a profit. The party will buy a certain nominal amount of currency to get the difference in profit. This kind of trading player is certainly experienced and always pays attention to various factors that influence the rise and fall of world currencies.

Story Of Forex

The world community could not buy foreign currency before 1944. For example, an American with only dollars cannot buy euros while traveling to European soil. Even when he is forced to pay for some of his needs, United States dollars will not be accepted as a means of buying and selling.

Instead, all international transactions in all corners of the world use the international gold price as a reference for all countries’ currencies in international trade. It was only after 1970 that the United States dollar currency could be used as an acceptable means of payment worldwide.

How Forex Works

There are still many people who think that forex is just a game or even a gamble. This is based on none other than forex activities that rely on luck and a prediction system. This is not quite right because forex also requires accuracy and various calculations and analyzes.


Those who “play” forex (forex broker)) — commonly called traders — will manage and execute transactions that can be done by themselves or using the services of credible brokers. Brokers in this case not only act as intermediaries, but also provide facilities such as security systems, separate accounts, transaction facilities, and so on. This broker is also the informant for traders to carry out market analysis.

Currency Exchange Rate Fluctuation

Please note that in the forex market there is no center or reference for the value of a currency. In other words, no individual, institution or organization can move the forex market unless the party has very large funds to move the market price even though in the end the effect is not very significant.

Transactions on the forex market can occur due to fluctuations in foreign currency exchange rates. The contributing factors also vary, such as economic turmoil in major countries, geopolitical conditions, large ethnicity levels, and so on. This will lead to the concept of supply and demand. For example, when global conditions make many people need United States dollars, the value of that currency will increase — conversely, too many United States dollars in circulation will decrease the value of the currency.

How To Trade Forex?

Forex trading in principle, the simultaneous buying of one currency and selling of another. The currency pairs are then traded simultaneously for details see the following example.

Example : EUR/USD = 1.23700

The currency on the left (in this case the Euro) is the base currency, and the currency on the other side is called the quote currency. The above notation shows that 1 unit of the base currency is equal to 1.23700 of the quote currency (1 euro = 1.23700 USD).

That way, you have to pay 1.23700 USD if you want to buy 1 Euro. Conversely, if you want to sell 1 euro you have, you will get 1.23700 USD.

Forex is a foreign currency transaction that is increasingly being chosen as a way of investing. Forex trading involves certain currency pairs that are selected and can be traded according to certain conditions to achieve maximum results.