21/04/2025
What is Forex Trading?
Forex (foreign exchange) trading is the process of buying and selling currencies to make a profit. It’s the largest financial market in the world, with over $6 trillion traded daily.
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Key Concepts
1. Currency Pairs
You always trade one currency against another. For example:
• EUR/USD = Euro vs. US Dollar
• If you believe the Euro will strengthen against the Dollar, you buy the pair.
• If you believe it will weaken, you sell it.
2. Bid and Ask Price
• Bid: Price to sell a currency
• Ask: Price to buy a currency
• The difference is called the spread, which is how brokers often make money.
3. Leverage
Forex allows high leverage, meaning you can control a large position with a smaller amount of money.
• Example: 1:100 leverage means $100 can control $10,000 worth of currency.
• High risk, but also high potential reward.
4. Pips
A pip is the smallest price move a currency pair can make (usually 0.0001 for most pairs).
• If EUR/USD moves from 1.1000 to 1.1050, it moved 50 pips.
5. Lots
• Standard lot = 100,000 units of base currency
• Mini lot = 10,000
• Micro lot = 1,000
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How a Trade Works
1. You analyze a pair (technical or fundamental analysis).
2. Place a trade:
• Buy (long) if you expect it to go up.
• Sell (short) if you expect it to go down.
3. Use stop-loss and take-profit to manage risk.
4. Monitor the trade and close it manually or automatically.
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Market Hours
• Open 24 hours, 5 days a week.
• Four main sessions: Sydney, Tokyo, London, New York — most active during London & New York overlap.
