Forex

Online Forex trading: everything you need to know to start trading Forex

So you want to learn the basics, maybe even gain a detailed understanding of Forex trading. Well, you’ve come to the right place!
In this guide we explore all the vital things you need to know before starting to trade Forex, in order to understand how to safely enter the markets using an effective strategy.
First, we will explain what Forex trading is and how it works. Then we will cover basic terminology so you can become familiar with the words and phrases used in foreign exchange trading. Following that, we also delve into calculations you will use in your day‑to‑day life as a Forex trader.
Our guide aims to equip you with tools to expand your knowledge and understanding of Forex trading before entering global markets. If you already have some experience, feel free to jump to the sections that interest you. Just click on the menu headings below to go to relevant content.

What is Forex trading and how does it work

Foreign exchange, or Forex, is a market in which you can exchange one currency for another. With a daily trading volume of $6.6 trillion, the Forex market is enormous! It dwarfs the New York Stock Exchange (NYSE), whose trading volume is only $22.4 billion per day by comparison.
The massive size of the Forex market draws a wide array of participants, including central banks, investment managers, hedge funds, corporations, brokers, and retail traders, with 90% of them being currency speculators! So what exactly happens in the Forex market that makes it so attractive to investors globally?

Now imagine you want to exchange one currency for another. Essentially, you are selling one currency and buying another or “exchanging” it.
The exchange rate between those two currencies is critical when trading Forex. Exchange rates fluctuate constantly, and these fluctuations allow traders to profit or possibly lose their investment. These fluctuations are driven by supply and demand of each currency!
Also note that while you trade, millions of others are simultaneously active in the Forex market.
So when you “sell” a currency, someone else is buying it somewhere else. The more participants trading, the more money in the market, which we call “liquidity.” As mentioned, the Forex market is massive, with millions of traders worldwide. Because of that, liquidity is very high!

What is Forex?

Across the globe, there are about 13.9 million traders simultaneously buying and selling currency. As mentioned, that means Forex liquidity is extremely high.
High liquidity ensures traders can enter and exit positions because there's usually a buyer for the currency you sell or a seller for the currency you buy!
High liquidity also has other implications. If liquidity is high, there are many market participants, so costs like spreads may be lower. It also means the market is less susceptible to manipulation—if someone places a large trade in a low‑liquidity market, it would massively impact price. That doesn’t happen in Forex because of the huge volume!
Also, because Forex encompasses all world currencies, it is effectively open 24 hours a day, Monday through Friday. Trading these currencies is over‑the‑counter (OTC), meaning there is no central exchange like with stocks. It is a global network of financial institutions and banks rather than a central exchange such as the NYSE.
As an individual, you'd likely be categorized as a “retail trader.” Still, most Forex trading is conducted by “institutional traders” like banks, funds, and major corporations. They may not intend to physically buy or sell the currency but rather speculate on price movements or hedge upcoming exchange rate changes.