Forex trading explained simply means understanding how the foreign exchange market works, what influences currency prices, and how traders can participate in it. This article breaks down everything you need to know to get started in the world’s most liquid financial market—from basic concepts to advanced strategies—so you can trade with confidence.

Key Takeaways

• Forex trading is the buying and selling of currency pairs
• It operates 24 hours a day, five days a week
• Profit is made by speculating on currency price movements
• Technical and fundamental analysis are used to predict trends
• Proper education significantly reduces risk and improves results

What Is Forex Trading?

Forex, or foreign exchange trading, is the global marketplace for trading national currencies. It involves buying one currency while simultaneously selling another. These transactions occur in pairs, such as EUR/USD or GBP/JPY.

Currencies are traded electronically over-the-counter (OTC) via brokers, banks, and financial institutions. Unlike stock markets, forex does not have a central exchange. The market is open 24 hours a day from Monday to Friday, moving across global time zones from Sydney to New York.

How Forex Trading Works

Currency Pairs

Every forex trade involves two currencies:

• Base currency: The first listed (e.g. EUR in EUR/USD)
• Quote currency: The second listed (e.g. USD in EUR/USD)

If you believe the base currency will strengthen against the quote currency, you go long (buy). If you believe it will weaken, you go short (sell).

Leverage And Margin

Most brokers offer leverage, allowing you to trade larger amounts than your initial deposit. For instance, 1:30 leverage means £1,000 gives you control of £30,000 worth of currency.

Pips And Lot Sizes

• A pip is the smallest price movement in forex, usually 0.0001.
• A lot is the standard trading volume: 1 standard lot = 100,000 units of the base currency.

Forex Trading Platforms

Popular platforms include MetaTrader 4 (MT4), MetaTrader 5 (MT5), and cTrader. These platforms provide real-time data, technical indicators, and execution tools essential for managing trades.

Case Study: Understanding Through Real Practice

A student enrolled in our CPD Accredited Mini MBA in Applied Professional Forex Trading had no background in trading. In just eight weeks, they learned to use MT4, analyse charts, manage risk, and follow economic data to place trades. By applying structured learning and simulation training, they transitioned from confusion to clarity, executing trades with confidence and logic rather than emotion.

Fundamental vs Technical Analysis

Factor	Fundamental Analysis	Technical Analysis
Focus	Economic reports, news, interest rates	Charts, patterns, price action
Example Tools	CPI, GDP, central bank minutes	RSI, MACD, candlestick formations
Timeframe	Medium to long term	Short to medium term
Used In Our Course	Yes	Yes

Frequently Asked Questions

What is forex trading in simple terms?

It’s buying one currency and selling another at the same time to make a profit as exchange rates change.

Is forex trading risky?

Yes, forex trading carries risk, especially with leverage. However, education and proper risk management can minimise losses.

Do I need a lot of money to start forex trading?

No. Many brokers let you open accounts with as little as £100. However, having a larger balance helps with risk control.

How do forex traders make money?

They profit from correctly predicting the movement of currency pairs. For example, buying EUR/USD low and selling high.

Where can I learn forex trading properly?

Join our expert-led Trading Courses to learn forex with structured mentoring and simulation training.