Risk Disclaimer : Forex & CFDs are complex products, not suitable for everyone, and come with the high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The Forex market (Foreign Exchange) is the world’s largest financial market, allowing individual traders and investors to speculate on the value of currencies such as the US dollar (USD), Japanese yen (JPY), and British pound (GBP). Before you start trading Forex, it’s essential to understand how it works.
Forex trading is always done in currency pairs—one currency against another. You can’t trade a currency in isolation; you’re always comparing its value to another. For example, when trading the USD/JPY pair, you are making a decision based on the relative strength of the US dollar compared to the Japanese yen. One currency will appreciate while the other depreciates.
Unlike stocks or bonds, Forex trading does not involve owning a physical asset. Instead, traders analyze the relative value of two economies and make predictions based on market trends, economic data, and geopolitical events.
The most actively traded currencies against the US dollar are known as major pairs, accounting for approximately 85% of daily trading volume. These include:
Currency pairs that do not include the US dollar are called cross pairs.
With over 180 currencies worldwide, the Forex market operates 24/5, providing high liquidity and constant trading opportunities. Unlike the stock market, there is no real bear market in Forex—when one currency falls, another rises. This allows traders to profit in both bullish and bearish conditions.
The Forex market is an exciting opportunity for traders and investors looking to take advantage of currency fluctuations. To succeed, it’s crucial to understand currency pairs, analyze economic indicators, and develop a solid trading strategy. By mastering the fundamentals of Forex trading, you can navigate the market with confidence and make informed trading decisions.
