The foreign exchange market — forex or FX — is where currencies are bought and sold. With an average daily turnover of more than $7.5 trillion, it is by far the largest and most liquid financial market in the world. Unlike stock exchanges, forex has no central marketplace: trading happens electronically, over the counter, between banks, institutions, brokers and individual traders around the globe.
How does forex trading work?
Currencies are always traded in pairs. When you buy EUR/USD, you are buying euros and selling US dollars at the same time. The first currency is the base currency and the second is the quote currency. A price of 1.0850 means one euro costs 1.0850 US dollars.
- If you think the euro will strengthen against the dollar, you buy (go long) EUR/USD.
- If you think it will weaken, you sell (go short).
Your profit or loss depends on how far the price moves in your favour, measured in pips, and on the size of your position, measured in lots. Read our guide to pips, lots and leverage for worked examples.
Major, minor and exotic pairs
| Category | Examples | Typical spread |
|---|---|---|
| Majors | EUR/USD, GBP/USD, USD/JPY | Very low |
| Minors (crosses) | EUR/GBP, AUD/JPY, GBP/CHF | Low to medium |
| Exotics | USD/TRY, USD/ZAR, EUR/PLN | High |
Majors involve the US dollar and the world's most traded currencies. They have the tightest spreads and deepest liquidity, which makes them the best place for beginners to start.
When is the forex market open?
Forex trades 24 hours a day, five days a week, following the sun from Sydney to Tokyo, London and New York. The most active — and usually the most profitable — periods are the overlaps between sessions, especially London and New York. Use our live Forex Market Hours tool to see which sessions are open right now in your time zone.
Who trades forex?
- Central banks manage reserves and influence their currencies through interest rates.
- Commercial and investment banks provide liquidity and trade for clients and themselves.
- Corporations exchange currencies to pay for imports, exports and overseas operations.
- Hedge funds and institutions speculate on macroeconomic trends.
- Retail traders like you access the market through online brokers.
How to start trading forex
- Learn the basics — understand pairs, pips, leverage and order types.
- Choose a regulated broker — see our ranking of the best forex brokers and the 10-point checklist.
- Practise on a demo account — every good broker offers free demo accounts with virtual money.
- Build a trading plan — define your strategy, risk per trade and goals.
- Start small — trade micro lots and use the position size calculator on every trade.
Risk warning: Leveraged forex trading is high risk. Most retail traders lose money. Only trade with money you can afford to lose.