What Is Forex Trading? A Practical Introduction

Forex (foreign exchange) is the market where currencies trade against each other. It runs around the clock from Monday to Friday, follows the sun from Sydney to Tokyo to London to New York, and is the largest financial market in the world by turnover. Retail traders access it through brokers, quoting pairs like EUR/USD or XAU/USD (gold against the dollar).

Pairs, pips and lots

Every price is a ratio: EUR/USD at 1.0850 means one euro buys 1.0850 dollars. Buying the pair is a bet the first currency strengthens against the second; selling is the opposite. A pip is the standard unit of price movement — 0.0001 on most pairs, 0.01 on yen pairs. A lot is the standard trade size of 100,000 units of the base currency; brokers also offer mini (10,000) and micro (1,000) lots, which is how small accounts trade at sensible risk.

Spread, leverage and margin

The spread is the gap between the buy and sell price — the cost you pay to enter. Leverage lets you control a position larger than your deposit; margin is the deposit the broker holds against it. Leverage multiplies both profit and loss on the same move, which is why position size — not leverage available — should be decided by the money you are willing to lose if your stop is hit. That calculation is position sizing, and it matters more than any indicator you will ever add to a chart.

Sessions

The market has a rhythm. Tokyo tends to be quieter for European pairs; London brings the day's first real volume; the London–New York overlap is typically the most active window; late New York thins out. Many traders discover, once they keep a record, that their edge lives in one or two sessions and their losses in another — something a journal that labels each trade's session makes visible.

What moves prices

Over minutes and hours: order flow, liquidity, and scheduled news — inflation prints, central-bank decisions, employment data. Over months: interest-rate differentials and macro flows. Most retail approaches are some blend of technical analysis for timing and awareness of the calendar for risk, because a routine setup taken thirty seconds before a payrolls release is not the same trade.

The honest starting point

Nothing about forex is easy money. Spreads and losses compound quietly, leverage punishes oversizing, and most new traders lose while they are learning. The durable path is unglamorous: small risk per trade, one or two setups, and a written record from the first trade onward — so that when something works, you can prove it, and when something leaks, you can name it.