Forex is the global marketplace where currencies are traded. At $6 trillion in daily volume, it is the world's largest financial market. Forex operates 24 hours a day, five days a week, because currency trading spans multiple global time zones.
How forex trading works
Currencies are always traded in pairs—for example, EUR/USD (euros and US dollars). When you buy a pair, you are buying the base currency (the first one) and selling the quote currency (the second one). You profit when the exchange rate moves in your expected direction.
Key concepts for forex traders
Leverage: Forex brokers offer leverage, letting you control a large position with a small deposit. This magnifies both gains and losses, making risk management essential.
Market participants: The forex market includes retail traders, institutional investors, banks, hedge funds, and central banks. Understanding these players helps explain price movements and liquidity patterns.
Analysis approaches: Traders use two main methods. Technical analysis examines historical price charts and patterns to predict future moves. Fundamental analysis looks at economic data, interest rates, geopolitical events, and other macroeconomic factors to determine currency strength.
Market characteristics
Forex is decentralized—there is no central exchange. This decentralized structure creates high liquidity and continuous price discovery.
