Forex
Forex (FX) is the global market for exchanging currencies, where one currency is bought with another. It is the largest financial market by volume and trades 24 hours a day, five days a week.
How it works
Forex is traded in currency pairs such as EUR/USD: buying the pair means buying euros and selling dollars. There is no single exchange; trades happen between banks, funds, companies and brokers worldwide. The week opens Monday morning in Asia and runs until Friday evening in New York.
Rates move on central bank interest rates, inflation, economic data and politics. A typical daily move in a major pair is a fraction of a percent, so retail traders trade with leverage through a broker, most often as CFDs or spot forex with no delivery of actual currency.
Leverage is what makes forex risky: a small move against you can wipe out a big part of your deposit. Many countries restrict retail trading, and unlicensed brokers are a common source of fraud.
You buy 0.1 lot of EUR/USD (10,000 euros) at 1.0800 and close at 1.0850. The rate rose 50 pips, a pip is worth $1 on 0.1 lot, so you make $50. At 1:30 leverage the margin for this position is about $360.
The beginner mistake is seeing forex as a fast way to double a deposit and starting with maximum leverage. Brokers' own risk disclosures in the EU show that most retail CFD accounts lose money. Start on a demo, pick a licensed broker, risk no more than 1–2% of the account per trade, and always use a stop.
Questions and answers
What is forex in simple terms?
It is the market where one currency is exchanged for another, and traders make or lose money on changes in the exchange rate.
How much money do I need to start forex trading?
You can technically start small, but practise on a demo first and only trade money you can afford to lose.
Is forex trading legal?
Yes, the market itself is legal. Rules for retail traders and brokers depend on the country, so only use a licensed broker.
Related terms
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Updated: 2026-10-19