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A compass, in its simplest form, is a navigational aid for finding direction on earth. This is done by a magnetised pointer being allowed to swing freely and lining up with the Earth's magnetic field. The cardinal points derived from this are therefore North, South, East and West.
The first compass is believed to have been invented in China.
Constructing a simple compass
Any material that can be magnetised can be used as the pointer, usually metal. For example a length of metal, a needle or a section of coat hanger can be magnetised by rubbing it with an item of silk in one direction, this induces polarity and will give the metal and north and a south pole.
The now magnetised object must be allowed to move freely so place the pointer on a leaf or a piece of cork and place in a bowl of water. The northern pole of the length of metal will swing to point north.
Why a compass points North
The Earth's core consists of an elliptical mass of molten iron, as the Earth rotates on its access this iron core is also spun and this induces magnetism in the iron turning one end Positive (North) and the other end negative (south). The Southern pole of the iron core is in the Northern hemisphere and the North pole is in the southern hemisphere. The North pole of magnets therefore align them selves with the southern end of the core, and therefore face north.
A Modern Compass
Modern navigational compasses hold a magnetized needle inside a fluid-filled capsule; the fluid causes the needle to stop quickly rather than oscillate back and forth around magnetic north. The needle may be mounted on a "card" with various markings, which rotates with it. Other features common on modern handheld compasses are a baseplate with rulings for measuring distances on maps, a rotating bezel, for measuring bearings of distant objects or setting the bearing of travel, and a sighting mirror that lets the user see both the compass needle and a distant object at the same time, or a lens that permits reading the bearing off of the compass card with only a slight glance down from the sights. Further, some modern compasses include an inclinometer for measuring gradients and are adjustable to account for varying magnetic declination, a serious accuracy issue in some situations.