Forex trading, also known as foreign exchange trading or currency trading, is the act of buying and selling currencies on the global market to profit from price fluctuations. It is the largest and most liquid financial market in the world, with daily trading volumes exceeding $7 trillion.

This guide serves as a comprehensive “wiki-style” overview of forex trading, covering essential concepts, platforms, strategies, and resources for beginners and experienced traders alike.

What This Article Covers

• Definition and structure of the forex market
• Key terminology in currency trading
• How trading works in practice
• Tools, platforms, and strategies
• FAQs for quick reference

Key Takeaways

• The forex market operates 24/5 and includes major currencies like USD, EUR, JPY, and GBP
• Trades are executed in currency pairs such as EUR/USD or GBP/JPY
• Traders can use technical, fundamental, or sentiment-based strategies
• Leverage increases potential profits and risks
• You can learn step by step through a structured Forex Course

What Is Forex Trading?

Forex trading involves speculating on the relative value of one currency against another. For example, if a trader believes the euro will strengthen against the US dollar, they would buy EUR/USD. If the euro rises, they make a profit.

Currencies are traded in pairs, and the market is decentralised, meaning trading occurs over-the-counter (OTC) through global banks, brokers, and financial institutions.

Key Forex Trading Terms

1. Currency Pair

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

2. Pips

A pip (percentage in point) is the smallest unit of price movement in forex, typically 0.0001.

3. Spread

The difference between the bid (sell) and ask (buy) price. Lower spreads are better for traders.

4. Leverage

Allows traders to control large positions with small capital. For example, 1:100 leverage means £1,000 can control £100,000.

5. Lot Size

• Micro lot = 1,000 units
• Mini lot = 10,000 units
• Standard lot = 100,000 units

How Forex Trading Works

Step 1: Choose a Broker

Select a regulated broker offering tight spreads and reliable execution.

Step 2: Open and Fund an Account

Fund your trading account via bank transfer, card, or e-wallet.

Step 3: Analyse the Market

Use technical charts, economic calendars, and news events.

Step 4: Place Your Trade

Choose your pair, set lot size, apply stop loss and take profit.

Step 5: Monitor and Close

Track performance and close positions based on strategy or conditions.

Popular Forex Trading Strategies

1. Scalping

Quick trades lasting seconds to minutes, targeting small pips.

2. Day Trading

Positions opened and closed within the same trading day.

3. Swing Trading

Holding positions for several days to capture medium-term trends.

4. Trend Following

Riding the direction of the market using moving averages or trendlines.

Forex Trading Tools and Platforms

• MetaTrader 4/5 (MT4/MT5): Most popular retail platforms
• TradingView: Excellent charting with social analysis
• Economic Calendar: For tracking key events like NFP or rate decisions
• Indicators: RSI, MACD, Bollinger Bands, Ichimoku Cloud

Case Study: Learning Forex Step by Step

Emma, a university student in Manchester, began learning forex trading with no prior experience. She enrolled in a Forex Course that covered basics, strategy development, and live chart analysis. Within six months, she was confidently trading EUR/USD using a swing trading strategy, supported by daily journaling and risk management. Her progress demonstrates the importance of structured learning and mentorship.

Frequently Asked Questions

What is the forex market?

The forex market is a decentralised global exchange where currencies are traded 24 hours a day, five days a week.

How do I start trading forex?

You need to open an account with a forex broker, fund it, choose a currency pair, and place trades using a strategy.

Is forex trading risky?

Yes. Forex is highly volatile and involves leverage, which can magnify both gains and losses.

What currencies are most traded?

The most traded are USD, EUR, JPY, GBP, AUD, CAD, and CHF—often referred to as the major currencies.

Can I learn forex trading for free?

Yes, though a structured Forex Course can greatly speed up your learning and reduce costly mistakes.

Conclusion

Forex trading is an accessible and dynamic way to participate in global markets, but it requires knowledge, discipline, and practice. By understanding key terms, tools, and strategies—and committing to continuous learning—you can build the confidence to trade with purpose and precision.