COURSE 1 · FOREX FOUNDATIONS · LESSON 1
What Is Forex? A Beginner's Guide to the Currency Market
The foreign exchange market in plain English — what it is, how a single trade works in dollars and cents, and what the numbers everyone quotes actually mean.
Updated 2026-09-04 · Educational content · No broker owns this site
Quick answer. Forex (foreign exchange) is the global market where one currency is traded for another. There is no central exchange — banks and brokers deal directly, around the clock on weekdays. Currencies are always traded in pairs: every forex trade buys one currency and sells another at the same time.
What is forex, in one sentence?
Forex — short for foreign exchange, also written FX — is the market where one national currency is exchanged for another. When a company pays a supplier abroad, when a fund buys a Japanese bond, when you change money for a holiday, the transaction happens in this market.
Two things make it unlike the stock market:
- There is no central exchange. Apple shares trade on Nasdaq. Euros do not trade “on” anything. Forex is an over-the-counter (OTC) market: banks, brokers and funds deal directly with each other over private networks. There is no single official price, only the price your counterparty quotes you.
- It is enormous and open around the clock on weekdays. Trading in OTC foreign exchange markets averaged $9.6 trillion per day in April 2025, up 28% from $7.5 trillion three years earlier, according to the BIS Triennial Central Bank Survey.
If you see “$7.5 trillion a day” quoted somewhere, it is out of date. That was the April 2022 figure. The BIS survey is run every three years; the April 2025 figure, published in September 2025, is $9.6 trillion a day.
How does a forex trade actually work?
You cannot buy a currency on its own, because there is nothing to buy it with. Currencies are always quoted in pairs.
EUR/USD = 1.0851 means: one euro costs 1.0851 US dollars. That number is the exchange rate.
- The base currency is the first one, EUR. It is the thing being bought or sold, and its quantity is always 1.
- The quote currency is the second one, USD. It is the price tag.
So buying EUR/USD means buying euros and paying with dollars. Selling EUR/USD means selling euros and receiving dollars. Every forex trade is two actions at once — which is why there is no such thing as a market that is simply “going up”. Something is always going down against it.
You will always be shown two prices, never one:
- Bid — the price at which your broker will buy from you, so it is the price you sell at.
- Ask — the price at which it will sell to you, so it is the price you buy at.
The gap between the two is the spread, and it is the main cost of a retail forex trade. On EUR/USD a gap of 0.0001 is one pip: the fourth decimal place, the standard smallest step for most pairs. Pairs quoted against the Japanese yen are the common exception — there the pip is the second decimal place.
What does one forex trade look like in dollars?
Here is a complete trade, step by step, with nothing hidden. You buy one mini lot of EUR/USD — 10,000 units of the base currency — when the quote is 1.0850 / 1.0851.
| Step | What happens | Cash |
|---|---|---|
| 1 | You buy €10,000 at the ask, 1.0851 | You pay $10,851.00 |
| 2 | The market moves up; the new quote is 1.0871 / 1.0872 | — |
| 3 | You sell €10,000 back at the bid, 1.0871 | You receive $10,871.00 |
| 4 | Result: $10,871.00 − $10,851.00 | +$20.00 |
Where the $20 comes from: on a 10,000-unit position, one pip is 10,000 × 0.0001 = $1. The bid moved 21 pips (1.0850 → 1.0871), but you paid a one-pip spread on the way in, so you kept 20 pips × $1 = $20.
Now run the same trade in reverse. If the quote had fallen so that the bid was 1.0831, you would have sold your €10,000 for $10,831 and taken a $20 loss. The arithmetic is exactly symmetric. Nothing in the mechanics makes the first outcome more likely than the second.
Two things beginners routinely miss in that table:
- The spread is a real cost and you pay it on entry. One pip on a $10,851 position is about 0.009% — trivial once, but charged on every single trade. Twenty trades a day is a very different bill from two trades a month.
- Your result is measured in the quote currency. For EUR/USD that is US dollars, which is convenient if your account is in dollars. Trade EUR/GBP and your profit arrives in pounds, and has to be converted before it means anything to a dollar account.
Who actually trades $9.6 trillion a day?
Almost none of it is individuals. The BIS survey records who was on each side of the trade, and the picture is a market run by institutions moving money for reasons that have nothing to do with speculation.
| Who is trading | Share of daily FX turnover, April 2025 |
|---|---|
| Other financial institutions (smaller banks, institutional investors, hedge funds, proprietary trading firms) | 50% |
| Reporting dealers — the large banks trading with each other | 46% |
| Non-financial customers, e.g. companies paying for imports | 5% |
Source: BIS Triennial Central Bank Survey, April 2025 turnover. Shares are rounded by the BIS and do not sum to exactly 100%.
It is also worth knowing what is actually being traded, because retail platforms only really offer the smallest slice of it:
| Instrument | Daily turnover | Share | Mostly used for |
|---|---|---|---|
| FX swaps | $4.0tn | 42% | Managing short-term funding across currencies |
| Spot — the immediate exchange retail trading imitates | $3.0tn | 31% | Buying one currency for another now |
| Outright forwards | $1.8tn | 19% | Locking in a future exchange rate |
| FX options | — | 7% | Hedging or speculating on currency moves |
| Currency swaps | — | ~2% | Longer-term cross-currency funding |
Read the two tables together and the honest conclusion is this: the “$9.6 trillion a day” headline is real, but it is not a pool of money waiting to be won. It is mostly banks and funds hedging and funding. A retail trader is a very small guest at a very large table, and the size of the market is a statement about liquidity, not about opportunity.
What is leverage, and why does it matter on trade one?
You do not have to put up $10,851 to control the position above. Brokers lend against a deposit called margin, and regulators cap how far that can go for retail clients.
| Where you are | Cap on major currency pairs | Margin on our $10,851 position |
|---|---|---|
| EU (ESMA product intervention measures, in force since 2018) | 30:1 — a 3.33% deposit | $361.70 |
| United States (CFTC retail forex rules) | 2% security deposit on majors, i.e. 50:1 | $217.02 |
Now look at what that does to the same $20. A 20-pip move is a price change of roughly 0.18%. Against a $361.70 margin deposit, $20 is 5.5%. The market barely moved; your money moved thirty times as much. That is the whole of leverage in one line, and it works identically in the losing direction.
Risk warning. Leveraged forex trading carries a high risk of losing money quickly. Analysis by EU national regulators, published by ESMA in 2018, found that 74–89% of retail investor accounts typically lose money trading contracts for difference — the leveraged product through which most retail forex is offered in Europe — with average losses per client between €1,600 and €29,000. Nothing on this page is a prediction or a promise of any result. Read our risk disclosure before you risk money.
When is the forex market open?
Because forex is not tied to one building, it does not open and close — the working day simply moves around the planet. Trading runs continuously from Sunday evening to Friday evening, and traders describe it in four overlapping sessions.
That overlap matters because trading is heavily concentrated by geography. In April 2025, sales desks in just four places — the United Kingdom (about 38%), the United States (about 19%), Singapore (11.8%) and Hong Kong (7.0%) — handled three quarters of all FX trading. When London and New York are both at their desks, spreads are usually at their tightest and the market moves most.
One practical note: these hours shift by an hour when clocks change for daylight saving, and they shift at different dates in different countries. Always check the session times your own broker publishes rather than assuming.
Which currencies are traded most?
The market is far less varied than the number of world currencies suggests. The US dollar was on one side of 89.2% of all trades in April 2025, and every one of the ten most traded pairs involved it.
| Currency | Share of trades, April 2025 | Change since 2022 |
|---|---|---|
| US dollar (USD) | 89.2% | Up, from 88.4% |
| Euro (EUR) | 28.9% | Down, from 30.6% |
| Japanese yen (JPY) | 16.8% | Virtually unchanged |
| Pound sterling (GBP) | 10.2% | Down sharply, from 12.9% |
| Chinese renminbi (CNY) | 8.5% | Up |
| Swiss franc (CHF) | 6.4% | Up — now the sixth most traded, from eighth |
Source: BIS Triennial Central Bank Survey, April 2025. Shares total 200%, not 100%, because every trade involves two currencies and is counted on both sides.
That last line trips up almost everyone reading BIS figures for the first time. It is not an error: a EUR/USD trade adds to the euro column and the dollar column.
So is forex worth learning?
Forex has genuine advantages for a beginner learning to trade: it is liquid, it is open at whatever hour suits your job, spreads on major pairs are narrow, and position sizes go small enough that you can practise without risking much. Those are real, and they are why so many people start here.
The disadvantages are equally real, and they are the reason this course exists. Leverage turns small price moves into large account moves before you have learned to size a position. The market is open at every hour, which quietly rewards overtrading. And the regulator statistics above describe the outcome for most retail accounts, not a scare story.
The order that works is boring and it works: understand the vocabulary, then the arithmetic of risk, then a method — and only then, if ever, real money. If you are new to the site, start here for the route through it. The single most useful thing to read next is how much of an account to put at stake on one trade: risk per trade. And the fastest way to make the numbers on this page feel real is to put your own into a calculator.
Frequently asked questions
What is forex in simple words?
Forex is swapping one country’s money for another’s. Because you always give up one currency to get another, prices are quoted in pairs — EUR/USD at 1.0851 means one euro costs 1.0851 US dollars. Traders try to profit from those exchange rates changing; businesses and banks mostly use the market to move and hedge money.
Is $100 enough to start forex trading?
Many brokers will open an account with $100 or less, so yes in the narrow sense. But the arithmetic does not change with account size: if you risk 1% of a $100 account you are risking $1, which is one pip on a mini lot or ten pips on a micro lot. A small account does not make trading safer or easier — it just makes each mistake cheaper, which is exactly what it is good for while you learn.
Is forex trading the same as gambling?
The mechanics differ: exchange rates respond to interest rates, growth, trade flows and central bank policy, so the outcomes are not random draws, and a trader controls position size, entry and exit. But trading without an edge, without risk limits and with high leverage produces the same distribution of results as gambling does. The distinction is in method and risk control, not in the instrument.
Do I need a broker to trade forex?
Yes. Retail traders cannot access the interbank market directly, so you trade through a broker that quotes you a price. Before depositing anything, check the firm on its regulator’s public register — for example the FCA in the UK, ASIC in Australia, CySEC in Cyprus, or the NFA’s BASIC database in the United States. An unregistered counterparty is the single most expensive mistake a beginner can make.
Does the forex market ever close?
Yes — at the weekend. Trading runs from around 22:00 UTC on Sunday to around 22:00 UTC on Friday, then stops until Sunday evening. Prices can still move over the weekend in response to news, which is why a market can reopen at a different level from where it closed.
Sources
- BIS, “OTC foreign exchange turnover in April 2025”, Triennial Central Bank Survey, 30 September 2025
- BIS, “Global FX trading hits $9.6 trillion per day in April 2025”, media release, 30 September 2025
- ESMA, “ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors”, 27 March 2018 (leverage caps; 74–89% retail loss figure)
- CFTC, “Final Rule Regarding Retail Foreign Exchange Transactions” fact sheet (2% security deposit on major currencies)
- CFTC, “Foreign Currency Trading” investor education
- BabyPips, “Forex Trading Sessions” (session hours in GMT/UTC)