What is Forex? Forex Basics

Forex Educational Video Series

What is Forex?

Forex (or FX) stands for Foreign Exchange, which is the “place” where currencies are traded. In this market, exchanging one currency for another is called currency trading, which is always done in pairs. For example, if a trader wanted to exchange Euro (EUR) for US Dollar (USD), the currency pair he would trade would be the EURUSD. Trading currencies implies that a trader simultaneously buys one currency while selling the other. Various economic, political and environmental factors contribute to the changing values of currencies, and forex traders buy and sell currencies in order to take advantage of these swings in value. The forex market is a global, decentralized market, which has the greatest volume of trading than any other market at $5 trillion per day, has no physical location or central exchange and it trades for 24 hours a day, 5 days a week.

How can I make money from forex trading?

The idea is to predict how a currency pair's price will move, and open a position based on that prediction. You could profit from either a rise in price by going long, or a fall in price by going short.

How much will it cost to trade forex?

There’s usually no commission or fees to pay. Brokers are paid through the ‘spread’, which is the difference between the bid and ask prices.

What about trading capital?

You can start trading with us for as little as $100. You don’t need a huge deposit, as trading with leverage reduces the initial amount you need to open a position.

Please note: leverage is dependent on your knowledge and experience, and can increase your losses as well as your profits.

Which currency pairs are traded most in forex?

The most popular currency pair is EUR/USD, followed by USD/JPY, GBP/USD, AUD/USD, USD/CHF, USD/CAD and NZD/USD. These pairs are known as the ‘majors.’

How is the exchange rate for a currency pair measured in forex?

The standard unit of measurement for change in value between currencies is the pip. It stands for “point in price” or “percentage in point”.

What are the main benefits of trading forex?

In the forex market you can:

  • Trade 24 hours a day, 5 days a week.
  • Make your money go further with leverage
  • Capitalise on high liquidity and volatility
  • Trade at low cost

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

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Risk Warning: Trading Forex and Leveraged Financial Instruments involves significant risk and can result in the loss of your invested capital. You should not invest more than you can afford to lose and should ensure that you fully understand the risks involved. Trading leveraged products may not be suitable for all investors. Trading non-leveraged products such as stocks also involves risk as the value of a stock can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Before trading, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary. It is the responsibility of the Client to ascertain whether he/she is permitted to use the services of the FXTM brand based on the legal requirements in his/her country of residence.  Please read FXTM’s full Risk Disclosure.

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