Understanding the basics of forex trading is the essential first step to participating in the global currency markets. Forex, short for foreign exchange, involves trading one currency for another with the aim of profiting from changes in exchange rates. It operates 24 hours a day, five days a week, and is the largest financial market in the world.

Key Takeaways

• Forex trading involves buying one currency and selling another
• Currencies are traded in pairs (e.g., EUR/USD, GBP/JPY)
• The forex market is decentralised and operates globally
• Traders use platforms, analysis tools, and leverage
• Learning the basics helps reduce risk and increase profitability

What You Need To Know Before Trading Forex

1. Currency Pairs

In forex trading, currencies are quoted in pairs such as GBP/USD. The first currency is the base, and the second is the quote. You trade based on the expectation that one currency will strengthen or weaken against the other.

2. Bid and Ask Price

• Bid Price: What the market will pay for the currency
• Ask Price: What the market will sell the currency for
  The difference between these prices is the spread — your cost of entry.

3. Pips and Lots

• A pip is the smallest price movement in forex (typically 0.0001)
• A lot is the trade size. Standard lots = 100,000 units of the base currency

4. Leverage and Margin

Leverage allows you to control large trades with a small deposit. In the UK, the maximum for major currency pairs is 30:1 for retail traders.

5. Forex Trading Platforms

Popular platforms like MetaTrader 4 (MT4), MetaTrader 5 (MT5), and cTrader provide real-time charts, trade execution, and technical indicators.

6. Types of Forex Analysis

• Technical Analysis: Using price charts and indicators
• Fundamental Analysis: Analysing economic data and news
• Sentiment Analysis: Gauging trader emotion and positioning

Case Study: Beginner Success Story

A learner enrolled in our CPD Accredited Mini MBA in Applied Professional Forex Trading began with zero knowledge of forex. Through structured modules, they mastered the basics, including currency pairs, lot sizing, and chart analysis. By the end of the course, they confidently executed their first live trade on EUR/USD using the exact trading strategy taught — and closed with a modest but real profit. This validated how understanding the basics provides the foundation for consistent growth.

Fundamental vs Technical Analysis in Forex

Feature	Fundamental Analysis	Technical Analysis
Focus	Economic indicators, interest rates	Charts, price patterns, indicators
Tools Used	GDP, CPI, NFP, central bank policies	RSI, MACD, Moving Averages
Timeframe	Medium to long-term	Short to medium-term
Best For	Position traders, macro investors	Day traders, swing traders

Frequently Asked Questions

What is forex trading in simple terms?

Forex trading is the exchange of one currency for another, aiming to profit from price changes between the two.

How do beginners start forex trading?

By learning the basics, choosing a regulated broker, opening a demo or live account, and practising with small trades.

What are the risks in forex trading?

Risks include leverage magnifying losses, volatile markets, and emotional decision-making. Risk management is essential.

What is the minimum to start forex trading?

Some brokers allow you to start with as little as £100, but it’s recommended to begin with a demo to build skill first.

Where can I learn forex trading basics step by step?

Our Trading Courses provide a complete beginner-to-advanced roadmap, including strategy, psychology, and live market practice.