WHAT IS FOREX?

By: Rimi

Published on: Mar 08, 2025

Introduction

Forex, also known as foreign exchange or FX trading, is the largest and most liquid financial market in the world. It involves the buying and selling of currencies, allowing traders and investors to profit from fluctuations in exchange rates. With a daily trading volume exceeding $7 trillion, forex operates 24 hours a day, five days a week, connecting global financial institutions, corporations, and individual traders.

Understanding Forex Trading

Forex trading is based on currency pairs, where one currency is exchanged for another. The value of a currency pair fluctuates based on various economic, political, and market factors. Traders aim to buy a currency when its value is low and sell it when its value rises, making a profit from the price difference.

Examples of Currency Pairs

• Major Pairs: EUR/USD, GBP/USD, USD/JPY


• Minor Pairs: EUR/GBP, GBP/JPY, AUD/NZD


• Exotic Pairs: USD/TRY, EUR/ZAR, GBP/MXN

How Forex Works

Forex trading is conducted over-the-counter (OTC), meaning there is no central exchange. Instead, transactions take place electronically via a network of banks, brokers, and traders. The market is divided into three main trading sessions:

1. Asian Session – Includes Tokyo, Hong Kong, and Sydney markets.


2. European Session – Dominated by London, the largest forex trading hub.


3. American Session – Led by New York, with high trading activity.

Traders use different strategies like scalping, day trading, swing trading, and position trading to take advantage of market movements.

Why Trade Forex?

✔ High Liquidity – Easy to enter and exit trades due to massive market volume.
✔ 24/5 Market – Trade anytime from Monday to Friday.
✔ Leverage – Allows traders to control large positions with a small investment.
✔ Low Transaction Costs – Forex brokers offer competitive spreads and minimal commissions.

Conclusion

Forex trading offers incredible opportunities for profit, but it also comes with risks. Traders must develop solid strategies, manage risks effectively, and stay updated on market trends. Whether you're a beginner or an experienced trader, understanding forex trading is the key to success in the financial markets.