What is Forex?
Forex (foreign exchange) is the global market where currencies are bought and sold. With daily trading volume exceeding $6.6 trillion, it is the world's largest and most liquid financial market. Unlike stock markets, Forex operates 24 hours, 5 days a week.
How Does Forex Trading Work?
Forex trading involves buying one currency while simultaneously selling another. Currencies always trade in pairs, for example EUR/USD. When you buy EUR/USD, you buy Euro and sell US Dollar.
Example: If EUR/USD trades at 1.0850 and you expect it to rise, open a buy (long) position. If it rises to 1.0900 you gain 50 pips. If it falls to 1.0800 you lose 50 pips.
Basic Forex Concepts
Currency Pairs
Currency pairs fall into three categories:
- Major pairs: EUR/USD, GBP/USD, USD/JPY, USD/CHF — highest liquidity and tightest spreads.
- Minor pairs: EUR/GBP, EUR/JPY, GBP/JPY — cross pairs without USD.
- Exotic pairs: USD/TRY, EUR/ZAR — emerging market currencies, wider spreads.
Pip
A pip (Percentage in Point) is the smallest price move in a currency pair. For most pairs 1 pip = 0.0001. For JPY pairs 1 pip = 0.01.
Lot
Lot is the standard unit in Forex trading:
- Standard lot: 100,000 units of base currency
- Mini lot: 10,000 units
- Micro lot: 1,000 units
Leverage
Leverage lets you control large positions with small capital. With 1:500 leverage, $200 can control a $100,000 position.
Warning: High leverage can lead to large losses. Always use proper risk management and never trade with money you cannot afford to lose.
Spread
Spread is the difference between bid and ask price. It represents the broker's commission. Lower spread means lower trading cost. XM offers spreads from 0.6 pips on major pairs.
Forex Market Sessions
Forex operates in four main sessions (GMT+3):
- Sydney: 01:00 - 10:00
- Tokyo: 03:00 - 12:00
- London: 11:00 - 20:00
- New York: 16:00 - 01:00
Highest volatility occurs during the London-New York overlap (16:00–20:00 GMT+3).
Getting Started
Ready to start your Forex journey? Here's what you need:
- Choose a regulated broker like XM
- Open a demo account to practice
- Learn technical and fundamental analysis
- Develop a trading plan and risk management strategy
- Start small and gradually increase position sizes
Tip: XM offers a $30 no-deposit bonus for new accounts. Trade with real money without any initial investment — ideal for beginners!