Forex introduction
What is forex?
3 min
Forex — short for foreign exchange, also written FX — is the global marketplace for buying and selling currencies. Every time one currency is exchanged for another, that is a forex transaction.
It is, by a wide margin, the largest financial market on the planet. More than US$7 trillion changes hands every single day, dwarfing the daily turnover of all the world’s stock markets combined.
Why a market for currencies exists
Currencies are exchanged for very practical reasons:
- An importer in Brazil paying a supplier in the United States needs US dollars.
- A tourist travelling to Japan needs yen.
- A fund manager buying European stocks needs euros.
- A central bank managing its reserves shifts between currencies.
On top of those real-economy needs sits a huge layer of speculation — traders trying to profit from changes in exchange rates. That speculation is what gives the market its enormous liquidity and round-the-clock activity.
What you are actually trading
You never trade a currency in isolation — you always trade one currency against another, as a pair. Buying EUR/USD means buying euros while simultaneously selling dollars. If the euro strengthens relative to the dollar, the position gains; if it weakens, it loses.
That single idea — that every forex trade is a relationship between two currencies — is the foundation everything else in this track builds on.
This content is for educational and informational purposes only and is not investment, financial, tax or legal advice. Trading and investing carry risk, including the possible loss of capital. Any performance shown by third-party tools is hypothetical and not a promise of future results. Do your own research and consider professional advice before making any decision.