What Is Forex?

What the Market Actually Is

Forex - foreign exchange - is where one currency is exchanged for another: EUR/USD, GBP/JPY, USD/TRY. It is the largest financial market on earth, turning over roughly $7.5 trillion a day according to the Bank for International Settlements, which is more than every stock exchange in the world combined.

It has no building. There is no forex exchange the way there is a New York Stock Exchange - it is a network of banks, brokers and institutions dealing with each other directly, which is exactly why it can run twenty-four hours a day.

It opens Monday morning in Sydney and closes Friday evening in New York, moving between financial centres as each one wakes: Sydney, Tokyo, London, New York. The overlap between London and New York is the busiest window of the day and where most of the movement happens.

Reading a Pair

Every quote has two currencies. EUR/USD at 1.0850 means one euro costs 1.0850 dollars. The first is the base, the second is the quote, and the number is simply the price of one in terms of the other.

• Buy EUR/USD - you expect the euro to strengthen against the dollar.
• Sell EUR/USD - you expect the euro to weaken against it.

That second line is what confuses newcomers: how do you sell something you do not own? Which brings us to what you are actually trading.

You Are Not Buying Currency

This is the part most introductions skip, and it changes how the whole thing makes sense.

As a retail trader you are not exchanging euros for dollars. No currency reaches your account. You are opening a contract with your broker on the difference between the price when you open and the price when you close - a CFD, a contract for difference.

That is why you can sell first and buy back later, why you can open a $100,000 position with $1,000, and why weekends close the market: nothing is being delivered, only a difference being settled.

It also explains the costs. There is no exchange commission - you pay the spread (the gap between buy and sell price) and, if you hold overnight, a swap for the interest-rate difference between the two currencies.

Where Your Money Actually Comes From

Profit and loss is one multiplication: how far the price moved, times how large your position was.

Buy 0.10 lots of EUR/USD at 1.0850 and close at 1.0880 - 30 pips at about $1 per pip on that size - and you made $30. The same 30 pips on a full lot is $300. Identical market, identical analysis, different size.

Which is why position size matters more than the entry, and why every serious rule in trading is a rule about size rather than direction.

What Moves It

• Interest rates - the single largest driver. A currency whose central bank raises rates usually strengthens.
• Inflation and employment data, which are read as forecasts of what those rates will do next.
• Trade and current-account balances between the two economies.
• Political and geopolitical events, which move it fastest and least predictably.

Note that every one of those is a comparison. A currency never rises on its own - it rises against another one, which is why forex is always quoted in pairs.

Why This Page Exists

This is the market the account on this site trades. Every open and closed position on the live account page is a real forex, gold or crypto trade - the same instruments and the same mechanics described here, with the losses published alongside the profits.