What is Forex? A Complete Guide
Forex — short for foreign exchange — is the global marketplace where currencies are traded. With a daily trading volume exceeding $6.6 trillion, forex is by far the world's largest and most liquid financial market. Unlike stock exchanges, forex operates 24 hours a day, five days a week, through a decentralized network of banks, brokers, and institutions spanning every major financial center.
Kacper MrukUpdated: March 14, 2026How Forex Trading Works
Currencies always trade in pairs — for example EUR/USD (euro vs. US dollar). When you buy EUR/USD, you're simultaneously buying euros and selling dollars. The price of a currency pair reflects how much of the quote currency (second) is needed to buy one unit of the base currency (first). Prices change based on supply and demand driven by economic data releases, central bank decisions, geopolitical events, and market sentiment. Traders profit by correctly predicting whether a currency will strengthen or weaken relative to another.
Major, Minor, and Exotic Currency Pairs
Major pairs include the most traded currencies: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD, and NZD/USD. These offer the tightest spreads and highest liquidity. Minor pairs (crosses) don't include USD — examples are EUR/GBP, EUR/JPY, GBP/JPY. Exotic pairs combine a major currency with one from an emerging economy (USD/TRY, EUR/PLN). Majors account for about 80% of all forex volume and are recommended for beginners due to lower trading costs and more predictable behavior.
Forex Trading Sessions
The forex market follows the sun around the globe through four main sessions. The Sydney session (22:00-07:00 GMT) opens the trading week with moderate liquidity. The Tokyo session (00:00-09:00 GMT) sees strong JPY and AUD moves. The London session (08:00-17:00 GMT) is the most active, accounting for ~35% of daily volume. The New York session (13:00-22:00 GMT) overlaps with London, creating the most volatile period of the day — ideal for active traders. Understanding session times helps traders choose when to trade based on their preferred currency pairs.
Who Trades Forex and Why
The forex market serves many participants. Central banks manage currency reserves and influence rates. Commercial banks handle large institutional transactions. Hedge funds and investment firms speculate for profit. Corporations hedge currency exposure from international trade. Retail traders — individuals like you — now represent about 5.5% of daily volume, enabled by online brokers offering leverage and advanced trading platforms like MT5. The diversity of participants ensures deep liquidity and tight spreads, especially on major pairs.
Getting Started with Forex Trading
To start trading forex, you need: a regulated broker (we recommend Vantage for its low spreads and 150% deposit bonus), the MT5 trading platform, and basic knowledge of technical and fundamental analysis. Begin with a demo account to practice without risk. Learn to read candlestick charts, understand support and resistance, and follow the economic calendar for market-moving events like CPI, NFP, and central bank rate decisions. The Take Profit app offers 354 trading lessons to accelerate your learning curve.
Frequently Asked Questions
Is forex trading legal?
Yes, forex trading is legal in most countries. Always trade with a broker regulated by reputable authorities such as ASIC, FCA, or CySEC to ensure your funds are protected and the broker operates within legal frameworks.
Can you make money trading forex?
Yes, but it requires education, discipline, and proper risk management. About 20% of retail traders are consistently profitable. Success comes from having a tested strategy, controlling emotions, and never risking more than 1-2% of your account on a single trade.
What is a pip in forex?
A pip (percentage in point) is the smallest standard price movement in a currency pair, typically the fourth decimal place (0.0001). For USD/JPY pairs, it's the second decimal (0.01). If EUR/USD moves from 1.1000 to 1.1005, that's a 5-pip move.
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About the author
Kacper MrukXAUUSD & ETHUSD Trader | Macro + options data | Think, don't follow
Creator of Take Profit Trader's App. Specializes in XAUUSD and ETHUSD, combining macro analysis with options data. He teaches not how to trade, but how to think in the market. Actively trading since 2020.
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