What is Forex Trading?

A Beginner’s Guide to the World’s Largest Market

Forex trading is the act of buying and selling currencies to make a profit. But what exactly is the Forex market, and how does it work?

In this lesson, you’ll learn the fundamentals of Forex trading — the essential first step for any beginner who wants to enter the world of currency trading.

What is Forex?

“Forex” stands for Foreign Exchange, and it’s the marketplace where currencies are traded.

• The Forex market is the largest and most liquid financial market in the world.

• Over $6 trillion USD is traded every single day.

• It operates 24 hours a day, five days a week, across major financial centers like London, New York, Tokyo, and Sydney.

• Unlike stock markets, Forex is decentralized, meaning it’s not tied to one central exchange.

---

🌍 Who Trades Forex?

Participants in the Forex market include:

• Central Banks & Governments

• Commercial Banks

• Hedge Funds & Institutional Investors

• Multinational Corporations

• Retail Traders (individuals like you and me)

Each group participates for different reasons — from managing currency reserves to making speculative trades.

---

How Does Forex Trading Work?

 

When you trade Forex, you’re buying one currency and selling another at the same time — this is why currencies are always traded in pairs (e.g., EUR/USD, GBP/JPY).

Example:

• You buy EUR/USD at 1.1000

• You sell it later at 1.1050

• That’s a 50-pip profit (more on pips in the next lesson)

Forex trading is essentially speculating on whether a currency will go up or down in value.

Why Trade Forex?

Here’s why millions of people are drawn to Forex:

• High Liquidity – Easily enter and exit trades

• Leverage – Control larger positions with small capital

• Low Barrier to Entry – Start with as little as $10–$100

• No Commissions – Many brokers offer commission-free trading

• Global News Impact – Economic events move currencies fast

 

Summary – Key Takeaways

• Forex is the world’s largest financial market, trading currencies.

• It operates 24/5 and is decentralized.

• You trade currency pairs and aim to profit from exchange rate changes.

• Forex is accessible, but risky — education and risk management are key.

➡️ What’s Next?

🔗 Next Lesson: Understanding Currency Pairs and Forex Quotes →
(Learn how currency pairs work and how to read a Forex quote.)