86% of retail investor accounts lose money when trading Online Forex/CFDs. You should consider whether you can afford to take the high risk of losing your money. By proceeding with the registration process, you acknowledge that you have read and understood our Risk Disclosure and Warning.
Account Types

Forex Trading 101
Reading Time: 4 Min
Experience Level:Beginner

What is the Forex Market? 


Before we start explaining what the Forex market is, let us first break down the word itself. Forex is derived from “Foreign (FOR) Exchange (EX)”, which indicates that it is where individuals and entities speculate on and exchange currencies. 


The Forex market is the largest and most liquid market in the world, and it opens 24/5. It is also decentralized, as there isn’t a physical location where traders go to buy and sell currencies. 


Forex History


  • 1876: Implementing Gold Exchange Standard (Stabilizing world currencies by pegging them to gold price). 
  • World War 2: Abandoning the Gold Exchange Standard.
  • 1944: Adopting the Bretton Woods System (Making the US Dollar the primary reserve currency backed by gold).
  • 1971: Ending the Bretton Woods System. 
  • 1976: Accepting the Floating Foreign Exchange Rates.   


What is Forex Trading?


Before we dive into betting on the rise or fall of currencies, we first need to explain an essential aspect of Forex, which is currency pairs. 


A currency pair is the quotation of two different currencies (the first being the base currency, and the second being the quote currency), with the value of one being compared to the other. There are three types of currency pairs:


Majors: Currency pairs that include any two of the following currencies:


  • Australian Dollar (AUD)
  • British Pound (GBP)
  • US Dollar (USD)
  • Canadian Dollar (CAD)
  • Euro (EUR)
  • Japanese Yen (JPY)
  • Swiss Franc (CHF)


Minors (AKA crosses): Currency pairs that are not major. These pairs can include only one of the above major currencies or even none of them. 


Exotics: Currencies of emerging economies. They are the least liquid among the three types. Examples of these are:


  • EUR/TRY
  • JPY/NOK
  • NZD/SGD


So, when we trade Forex, we speculate on the price of one currency against another. For example, if you think the USD is going to rise against the JPY, you can buy the USD/JPY pair when its price is low and then sell it when it rises to make a profit. 


Why Trade Forex?


Aside from being the largest market in the world, with a daily turnover of approximately USD 6.6 trillion (number in 2019), trading Forex has plenty of advantages: 


Accessibility: Since it is decentralized and open 24/5, you can trade Forex at your convenience. 

Volatility: You can take advantage of the frequent and rapid changes in exchange rates, thus profiting from rising or falling markets.


No commissions: Generally, there aren’t any trading commissions. For large volume trades, very low commissions may apply, which allows you to maximize your profit. 


Despite Forex being a great market for trading, beginners should be aware that it also carries potential risks.

Suggested Articles

Forex Charting
If you intend to use technical analysis, then you need a chart. In this article, we will discuss the three most popular chart types.
Introduction to Commodities
One of the essential steps everyone must take before they partake in any investment is to know what assets they will be working on. This will serve as a basic introduction to commodities and the commodities markets.
The Psychology of Trading
The usually overlooked factor relating to trading psychology is as essential in accumulating success in trading as learning fundamental and technical analyses for developing a holistic trading strategy. In this article, we will get to know how traders can and should intelligently handle the unpleasant emotions that often accompany trading.
Hedging 101
Naturally, investors are keen on protecting their finances from incurring massive losses by crafting robust trading strategies and risk management tools. In this article, we will highlight one of the most widely used risk management techniques, hedging.
Becoming a Full-time Forex Trader
You might have been in the Forex trading industry for a while now, and you feel like you have reached the place where you are confident in your Forex skills to trade in it full-time. Such a step would be considered a bold yet plausible move. First, you have to think it through before committing to the world of Forex trading.
Price Action Analysis
In this article, we will explain the meaning of price action analysis, which is the core of stock technical analysis.