What is the forex market?
The foreign exchange market is where currencies are bought and sold. It is the biggest financial market in the world, it never sits in one building, and it runs around the clock from Monday morning in Sydney to Friday evening in New York.
- Currencies always trade in pairs: you buy one and sell the other.
- Daily turnover is measured in trillions of dollars, so prices are deep and liquid for the major pairs.
- Leverage magnifies gains and losses. Position size and stop-losses matter more than any prediction.
What the forex market is
Every time you buy foreign currency for a holiday, a company pays a supplier abroad, or a fund buys overseas shares, one currency is exchanged for another. The forex (foreign exchange, or FX) market is the sum of all of that activity. Banks, funds, companies, governments and individual traders all take part.
There is no central exchange. Trading happens electronically between banks and brokers, which is why it is called an over-the-counter market. In its regular surveys, the Bank for International Settlements has put daily turnover at well over $7 trillion, far above any stock market.
Currency pairs
A price in forex always compares two currencies. In EUR/USD = 1.0850, one euro costs 1.0850 US dollars. The first currency is the base, the second is the quote. Buying the pair means buying the base and selling the quote. If the euro strengthens against the dollar, the price rises and your buy makes money.
| Group | What it is | Examples |
|---|---|---|
| Majors | The dollar against the other big currencies. Tightest spreads, deepest liquidity. | EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD |
| Minors | Major currencies against each other, without the dollar. | EUR/GBP, EUR/JPY, GBP/JPY |
| Exotics | A major against an emerging-market currency. Wider spreads and sharper moves. | USD/TRY, USD/ZAR, EUR/PLN |
When the market moves
Because the market follows the sun, it is split into sessions. Activity is highest when two sessions overlap, and the London and New York overlap is usually the busiest part of the day. Exact hours shift an hour or so with daylight saving.
News releases such as inflation, jobs and central bank decisions can move prices sharply within seconds. Our high-impact calendar lists them in your local time.
How a trade makes or loses money
Pips, lots and spread
- A pip is the standard small price step: 0.0001 for most pairs, 0.01 for pairs involving the yen.
- A lot is the trade size. One standard lot is 100,000 units of the base currency, and 0.01 lots (a micro lot) is 1,000 units.
- The spread is the gap between the buy and sell price. It is the main cost of a trade.
On EUR/USD, one pip on a standard lot is worth about $10. Try it below.
Leverage
Leverage lets you control a large position with a small deposit, called margin. At 1:30 leverage, about $360 of margin controls one 0.1 lot trade worth roughly $10,850. That is why a small price move can swing a small account by a lot. Leverage does not change the odds, only the size of the result, in both directions.
How beginners usually start
- Learn the vocabulary above and read a price chart.
- Practise on a demo or simulated account with real prices until your results are consistent over weeks, not days.
- Write down a plan: which pairs, which sessions, how much risk per trade, when you stop for the day.
- Review your trades. A journal beats memory every time.
Practise on real prices in the iVentureFX Sim, or take on a prop-style challenge with guard rails.
Prop trading firms: how funded accounts work
Trading indicators: what they show and what they miss
This article is for education and is not financial advice. Rules and figures from third parties change; check them at the source. Trading leveraged products carries a high risk of loss.