Forex,
explained.

Foreign exchange—forex or FX—is the global market where one currency is exchanged for another. It operates around the clock from Monday to Friday through a network of banks, institutions, brokers and traders.

The essential idea

You never trade a currency alone. You trade a pair, such as EUR/USD. If you buy EUR/USD, you expect the euro to strengthen against the US dollar. If you sell it, you expect the opposite.

The first currency is the base currency; the second is the quote currency. Pairs are commonly grouped into majors, minors and exotics.

• Majors: include the US dollar, such as EUR/USD or GBP/USD.
• Minors: major currencies without USD, such as EUR/GBP.
• Exotics: a major currency paired with an emerging-market currency.

More actively traded pairs often have tighter spreads. Exotic pairs may move sharply and cost more to trade.

A pip is a standard unit of price movement—usually the fourth decimal place. A lot describes trade size. The spread is the difference between the buy and sell price and is a trading cost.

Pip value changes with pair, position size and account currency. Always check the exact potential loss before placing an order.

Leverage lets you control a position larger than your deposit. Margin is the amount reserved to keep that position open. Leverage magnifies gains—but it magnifies losses just as quickly.

• Market order: trades at the best available current price.
• Limit order: aims to enter at a specified better price.
• Stop order: activates after price reaches a specified level.
• Stop-loss: closes a losing trade at a chosen level, though slippage can occur.
• Take-profit: closes a trade after a chosen profit target is reached.

Candlesticks show the open, high, low and close for a chosen period. Traders use charts to study trend, momentum, support and resistance—but no pattern predicts the future reliably.

Start simply

Choose one timeframe, identify the broader direction, mark recent highs and lows, and write down what would invalidate your idea before entering.

Risk management matters more than finding a “perfect” entry. Decide the maximum amount you can lose before every trade and size the position accordingly.

1. Use only risk capital.
2. Define the stop before entering.
3. Risk only a small fraction of capital per idea.
4. Avoid increasing size to recover a loss.
5. Keep a trading journal.

1. Choose a pair you understand.
2. Check major economic announcements.
3. Write down your entry, stop and target.
4. Calculate the maximum possible loss.
5. Use a demo account first.
6. Review the result without judging yourself only by profit or loss.