Forex (FX) trading is buying one currency while selling another, betting that the exchange rate between them will move in your favour. Currencies trade in pairs such as EUR/USD, over the counter, 24 hours a day from Sunday evening to Friday evening (New York time). It's the largest market in the world, averaging $9.6 trillion a day in April 2025, and retail traders usually trade it with leverage through a broker.
Forex is often the first market people try, because it's open around the clock, needs little capital, and is heavily advertised. It's also where leverage hurts beginners fastest. Here's how it actually works, from quotes and pips to who's on the other side of your trade.
Currency pairs: the basics
Every forex trade involves two currencies. In EUR/USD = 1.0850:
- EUR is the base currency: the one you're buying or selling.
- USD is the quote currency: the price is how many US dollars one euro costs.
Buying EUR/USD means you expect the euro to strengthen against the dollar. Selling means you expect it to weaken. Going short is just as simple as going long, which is one reason forex appeals to active traders.
Pairs fall into three groups:
| Group | Examples | Traits |
|---|---|---|
| Majors | EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, NZD/USD | Include the US dollar, tightest spreads, deepest liquidity |
| Crosses (minors) | EUR/GBP, EUR/JPY, GBP/JPY, AUD/JPY | No USD, wider spreads, some are very volatile |
| Exotics | USD/TRY, USD/ZAR, USD/MXN | Emerging-market currencies, wide spreads, gap risk |
Beginners are almost always better off in the majors.
Pips, lots and what a move is worth
A pip is the standard unit of movement: 0.0001 for most pairs, and 0.01 for yen pairs. If EUR/USD moves from 1.0850 to 1.0870, that's 20 pips.
Position size is measured in lots:
| Lot | Units of base currency | Approx. value per pip on EUR/USD |
|---|---|---|
| Standard | 100,000 | $10 |
| Mini | 10,000 | $1 |
| Micro | 1,000 | $0.10 |
So a 20-pip move is worth about $200 on one standard lot and $2 on one micro lot. Choosing the lot size from your stop distance is the core of forex risk management. Our position sizing guide shows the formula.
Score the Setup Before You Take It
TRADZY's Void Engine rates any setup 0–100 across 12+ variables: structure, trend alignment, volume, momentum and key levels.
Score a Setup Free →Who trades forex, and why the market is so big
The BIS Triennial Survey measured FX trading at $9.6 trillion per day in April 2025, up 28% from 2022. Most of it isn't speculation by individuals:
- Banks and dealers make markets and trade with each other.
- Corporations convert revenue and pay suppliers abroad.
- Asset managers and pension funds buy foreign assets and hedge currency exposure.
- Central banks manage reserves and occasionally intervene.
- Hedge funds and speculators, including retail traders, bet on direction.
Retail traders are a small slice. What drives major moves is interest rate expectations, economic data and risk sentiment, not chart patterns alone.
When the forex market is open
Forex has no central exchange. It trades around the world, following the business day:
| Session | Approx. hours (New York time) | Character |
|---|---|---|
| Sydney / Tokyo | 5 p.m. – 3 a.m. | Quieter, except yen and AUD/NZD pairs |
| London | 3 a.m. – 12 p.m. | Largest session, the most volume |
| New York | 8 a.m. – 5 p.m. | US data releases, active overlap with London |
The London–New York overlap (roughly 8 a.m. to noon ET) is usually the most liquid window of the day. Session-specific tactics are covered in How to Trade the London Session and How to Trade the New York Session.
What moves currencies
- Interest rates and central bank expectations. Currencies of countries expected to raise rates, or cut less, tend to strengthen. Fed, ECB, Bank of England and Bank of Japan meetings are major events.
- Economic data. Inflation (CPI), jobs (US non-farm payrolls), GDP and PMIs shift rate expectations. Check an economic calendar daily. Here's how to use the Forex Factory calendar.
- Risk sentiment. In risk-off moves, money tends to flow into the US dollar, yen and Swiss franc. In risk-on moves, it goes into higher-yielding currencies like AUD.
- Flows and positioning. Month-end rebalancing, large hedging flows and crowded trades unwinding can move prices sharply for reasons unrelated to the news.
Leverage: the rules depend on where you live
Leverage lets you control a large position with a small deposit (margin). It is also the main reason retail forex accounts blow up. Limits vary by country:
| Region | Typical retail maximum on major pairs | Notes |
|---|---|---|
| United States | 50:1 | NFA/CFTC-regulated brokers only; FIFO rule and no hedging in the same account |
| UK | 30:1 | FCA rules, trading via spread bets or CFDs, negative balance protection |
| EU | 30:1 | ESMA rules, negative balance protection, margin close-out at 50% |
| Australia | 30:1 | ASIC product intervention |
Having 30:1 available doesn't mean you should use it. Professional traders often run effective leverage far below that. See the European rules in detail in CFD Leverage Limits in Europe.
How retail traders access forex
- Spot forex through a retail broker (the US and most of the world).
- CFDs and spread bets (UK, EU, Australia). Spread betting is tax-free in the UK for most individuals. CFD trading explained.
- Currency futures on the CME (6E, 6B, 6J and micros): exchange-traded, with transparent pricing.
- Currency ETFs: simple, but limited and rarely used for active trading.
Check your broker's regulation before depositing, because forex has a long history of offshore brokers with weak protection.
Costs you'll pay
- Spread: the difference between bid and ask. This is your main cost on every trade.
- Commission: on ECN/raw-spread accounts.
- Swap / rollover: interest charged or paid for holding positions overnight, based on the rate difference between the two currencies.
- Slippage: especially around news releases.
The honest risk picture
EU and UK brokers must disclose the share of retail CFD accounts that lose money, and the figures are typically in the 60–80% range. The common reasons: too much leverage, no stop loss discipline, trading every session, and trading news without a plan.
If you're starting out:
- Pick one or two major pairs and learn their behaviour by session.
- Risk a fixed, small percentage per trade (0.5%–1% is common).
- Paper trade for at least a month, then go live on micro lots. See Paper Trading: How to Practice Without Losing Money.
- Journal everything, including the session, pair and your emotional state. Patterns like "I lose on GBP pairs in the Asian session" only show up in the data.
For a step-by-step intraday plan, read Forex Day Trading for Beginners. TRADZY's Void Engine works on FX pairs too, scoring structure, higher-timeframe alignment and momentum before you commit.
FAQ
Is forex trading legal?
Yes, in the US, UK, EU and most countries, as long as you use a properly regulated broker. In the US that means a broker registered with the CFTC and a member of the NFA.
How much money do I need to start forex trading?
Many brokers accept deposits of $100 or less, and micro lots make small positions possible. Enough to trade with sensible risk per trade matters more than the minimum deposit. With $500, risking 1% means $5 of risk per trade.
Is forex trading profitable?
It can be for a disciplined minority, but most retail accounts lose money. Profitability depends on having a tested edge, controlling leverage and keeping costs low, not on the market itself.
What is the best currency pair for beginners?
EUR/USD is the usual choice: the tightest spreads, the most liquidity, and behaviour driven by the most widely covered economies. USD/JPY and GBP/USD are also common, though GBP pairs can be more volatile.
Can you trade forex 24 hours a day?
Nearly. The market runs from Sunday evening to Friday evening (New York time), but liquidity varies a lot by session. Most traders focus on one or two sessions rather than trying to trade all of them.
Put This Into Practice
- Score your next setup 0–100 with the Void Engine before entering
- Log the trade and tag the setup in the TradLog
- Review weekly: keep what pays, cut what doesn't
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Educational content, not financial advice. Trading involves substantial risk of loss.