Introduction to forex trading is the starting point for anyone looking to enter the world’s largest and most liquid financial market. Forex, or foreign exchange, involves the buying and selling of currencies and is traded by individuals, institutions, central banks, and governments around the globe.

This article offers a complete beginner’s guide to understanding what forex trading is, how it works, why people trade forex, and how to get started safely and effectively.

Key Takeaways

• Forex trading is the exchange of one currency for another to profit from price changes.
• The forex market operates 24 hours a day, five days a week.
• Currency pairs are traded in lots and measured in pips.
• Success in forex requires education, a trading plan, and strong risk management.
• Forex trading is accessible to beginners through online platforms and demo accounts.

What Is Forex Trading?

Forex trading is the act of exchanging one currency for another — for example, buying the British Pound while selling the US Dollar (GBP/USD). Traders aim to profit from price fluctuations in currency pairs, such as:

• EUR/USD (Euro vs US Dollar)
• USD/JPY (US Dollar vs Japanese Yen)
• GBP/USD (British Pound vs US Dollar)

Why Trade Forex?

• Liquidity: Over $7.5 trillion traded daily — easy to enter and exit trades.
• Accessibility: Trade with as little as £100 using leveraged accounts.
• Flexibility: Open 24 hours a day from Monday to Friday.
• Volatility: Price movements offer short-term trading opportunities.
• Leverage: Amplify returns (and risks) using broker-provided capital.

How Forex Trading Works

Currency Pairs

Forex trades involve two currencies — the base currency and the quote currency. For example, in EUR/USD:

• EUR = base currency
• USD = quote currency

If EUR/USD rises from 1.1000 to 1.1050, the Euro has strengthened, or the Dollar has weakened.

Bid and Ask Prices

• Bid: Price you can sell the base currency
• Ask: Price you can buy the base currency
• The difference is called the spread — a broker’s profit.

Lots and Pips

• A lot = 100,000 units of currency (standard), but mini (10,000) and micro (1,000) lots are common
• A pip = 0.0001 (except for JPY pairs, where it’s 0.01)
• Profits/losses are measured in pips

Leverage and Margin

• Leverage lets you control a large position with a small amount of capital
• Example: 30:1 leverage means £1,000 controls £30,000
• High leverage increases potential profit and risk

How to Get Started with Forex Trading

1. Learn the Basics

Understand key concepts like currency pairs, pips, margin, and order types.

2. Choose a Regulated Broker

Select a reputable platform regulated by authorities like the FCA (UK), ASIC (Australia), or CySEC (Europe).

3. Use a Demo Account

Practice trading with virtual funds before risking real money.

4. Develop a Trading Plan

Create rules for:

• Entry and exit
• Risk management
• Strategy and indicators

5. Start with Micro Lots

Begin small, risk less than 2% of your account on each trade, and review your performance.

6. Invest in Education

Join structured Trading Courses to:

• Learn technical and fundamental analysis
• Understand market psychology
• Access mentorship and real-time guidance

Forex Market Sessions

Session	Location	Time (GMT)
Sydney	Australia	10pm – 7am
Tokyo	Japan	12am – 9am
London	United Kingdom	8am – 5pm
New York	United States	1pm – 10pm

Best trading hours: When London and New York sessions overlap (1pm – 5pm GMT).

Frequently Asked Questions

What is forex trading in simple terms?

Forex trading is buying one currency while selling another to profit from changes in exchange rates.

Is forex trading risky?

Yes. Forex trading involves leverage, which can amplify losses as well as profits. Risk management is essential.

How much money do I need to start forex trading?

You can start with as little as £100 using a micro account. Focus on learning first, not profit.

Can I learn forex trading on my own?

Yes, but structured courses and mentorship can accelerate your learning and help avoid common mistakes.

Do I need a licence to trade forex?

No licence is needed to trade your own funds. However, offering signals or managing funds for others may require regulation.