Forex, short for foreign exchange, is the global market where currencies are traded.
It’s the largest and most liquid financial market in the world, operating 24/5. Forex trading involves buying one currency while selling another, aiming to profit from changes in exchange rates.

What is Forex and Forex Trading?

Forex (short for “foreign exchange”) is the world’s biggest financial market. It’s where people and companies exchange one currency for another—like turning US dollars into euros.

With over $6.6 trillion traded every day, Forex is open 24 hours, five days a week. It’s popular for its high liquidity, low starting costs, and flexible trading hours.

Forex trading is the act of buying one currency while selling another to profit from changes in exchange rates.

 

 

 

What is Forex and How It Works

Forex = Foreign Exchange Market
Currencies are Exchanged (USD ⇄ EUR)
Open 24/5 — Traded Worldwide
Over $6.6 Trillion Traded Daily
Traders Buy One Currency & Sell Another
Profit from Exchange Rate Changes

How the Forex Market Works?

The Forex market is a global, decentralized market. It doesn’t have a physical location like a stock exchange. Trades happen electronically between banks, brokers, and traders all over the world.

 

 

 

Forex Trading Sessions

Forex trading runs 24 hours, Monday through Friday. Here’s how the market breaks down by session:

Market Session Time (EST)
Sydney 5 PM – 2 AM
Tokyo 7 PM – 4 AM
London 3 AM – 12 PM
New York 8 AM – 5 PM

 

💡 Pro Tip: The best trading hours are when two sessions overlap, like London & New York. More activity = better chances to trade.

Understanding Forex Currency Pairs

In Forex, currencies are always traded in pairs, such as EUR/USD (Euro vs. US Dollar).

  • Base Currency: The first one (EUR)
  • Quote Currency: The second one (USD)
Base Currency
First currency (EUR)
Quote Currency
Second currency (USD)
Example: If EUR/USD = 1.10, it means 1 Euro = 1.10 US Dollars.
📈 If you think the Euro will strengthen, you Buy.
📉 If you think the Euro will weaken, you Sell.

Types of Currency Pairs

Type Examples Details
Major Pairs EUR/USD, GBP/USD Most traded, low spreads, high liquidity
Minor Pairs EUR/GBP, AUD/CAD Less traded, no USD involved
Exotic Pairs USD/TRY, GBP/ZAR One major + one emerging market currency, more risky
Regional Pairs EUR/SEK, AUD/NZD Based on geographic regions, good for advanced traders

Key Forex Terminologies You Should Know

Must-Know Forex Terms

Spread

The gap between buy (bid) and sell (ask) price.

Example: If EUR/USD is 1.1200 (bid) and 1.1205 (ask), the spread is 5 pips.

Pip

Smallest price movement in a pair. Usually 0.0001.

Example: If EUR/USD moves from 1.1200 to 1.1201, that’s a 1 pip movement.

Leverage

Borrowed funds to control bigger trades.

Example: With 100:1 leverage, you can control $100,000 with only $1,000 of your own money.

Margin

Your deposit to open a leveraged trade.

Example: If you want to open a $10,000 position with 10% margin, you need to deposit $1,000.

Lot

Trade size. Standard = 100,000 units.

Example: A standard lot is 100,000 units of currency; a mini lot is 10,000 units.

Stop-Loss

Tool to close a trade at a set loss level.

Example: If you set a stop-loss at 1.1000, your position will close if the price reaches 1.1000, limiting your loss.

Long/Short

“Long” means buying, “short” means selling.

Example: If you buy EUR/USD, you’re going long. If you sell EUR/USD, you’re going short.

 

 

 

How to Trade Forex: Step-by-Step Guide

Starting Forex trading is easier than you think. Follow these steps:

1
Open a Forex account
Sign up with a regulated Forex broker like IC Markets
2
Choose a currency pair
Start with majors like EUR/USD
3
Analyze the market
Use charts, news, and economic indicators
4
Develop a strategy
Use demo accounts to test your plan
5
Place a trade (buy/sell)
Set lot size, stop-loss, and take-profit
6
Monitor and exit trade
Watch price movement, close at your target
Open a Demo Account

Risks and Rewards: Is Forex Trading Right for You?

 

 

 

Benefits and Risks of Forex Trading

Benefits:
  • Low entry cost
  • High liquidity
  • Potential for profits with leverage
Risks:
  • High volatility
  • Leverage can multiply losses
  • Emotional stress
Tip:

Always use risk management tools like stop-loss orders, and never trade more than you can afford to lose.

Start with a Demo Account

Conclusion

Forex trading gives you the chance to explore the world’s largest market—but only with the right knowledge and discipline. Learn the basics, try a demo, and slowly build confidence before you go live.

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