It is the largest financial market, and moreover, its daily turnover exceeded $7 trillion in 2024 according to the Bank for International Settlements (BIS). Unlike centralised stock exchanges, Forex operates as an over-the-counter (OTC) market, which means that trades are conducted directly between parties. In addition, these transactions take place electronically across major global financial centres such as London, New York, Tokyo, and Sydney. As a result, the Forex market remains open 24 hours a day and five days a week, ensuring that participants can trade continuously across different time zones.
The foreign exchange market functions through currency pairs. Each pair represents one currency’s value against another—for example, EUR/USD or GBP/JPY. When traders buy a pair, they are purchasing the base currency and selling the quote currency. Prices are determined by supply and demand, which are influenced by macroeconomic data, central bank policies, geopolitical events, and overall market sentiment.
FX market transactions involve leverage. Brokers allow traders to control positions many times larger than their deposits. For instance, with leverage of 1:100, a $1,000 deposit can control $100,000 in the market. While this magnifies potential profits, it equally amplifies losses, making risk management essential.
Suppose a trader expects the Euro to rise against the U.S. Dollar. In that case, they buy EUR/USD at 1.1000. If the pair rises to 1.1100 and they exit, they gain 100 pips.
With leverage of 1:50 and a $2,000 deposit, this could therefore result in a significant profit. Nevertheless, the same leverage can work against the trader. However, if the pair drops to 1.0900, they lose 100 pips, thereby showing the double-edged nature of leveraged Forex trading. As a result, traders must approach leverage with caution and a solid risk-management plan.
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Traders often combine technical analysis (charts, indicators like RSI or ATR), fundamental analysis (economic reports, interest rates), and sentiment analysis (crowd behaviour, news flow) to make informed decisions. Reliable tools include the IMF economic outlook and Forex economic calendars.
Forex is more than just a trading market; indeed, it is the heartbeat of the global economy. Moreover, it plays a vital role in connecting countries, businesses, and individuals, thereby driving international trade and investment.
Moreover, it connects businesses, governments, and individuals across borders, thereby shaping financial flows worldwide. Additionally, it offers unmatched liquidity, constant opportunities, and access to all levels of traders. Yet, it is also one of the riskiest markets, and therefore, it demands proper education, strong discipline, and strict risk control. In fact, without these essential elements, traders are far more likely to experience heavy losses. Ultimately, those who approach Forex as a business, rather than a gamble, can achieve long-term success.
Financial Markets / Trading
Currency Pair, Exchange Rate, Pips, Leverage, Spread, Broker, Major Currencies
