What Is Forex?

Forex trading (also known as “foreign exchange” or “FX trading”) is the world's largest financial market. Find out what it is and how it works below.

How forex trading works

Let's start with the basics. Put simply, forex trading is the act of buying one currency (the base currency) and selling another currency (the quote currency). You then have to attempt to predict whether the base currency will strenghten or weaken against the quote currency.

If the base currency strengthens, the market will rise (or appreciate), and if the base currency weakens then the market will fall (or depreciate). If you believe the market will rise, then you would go long (buy), and if you believe the market will fall, you would go short (sell).

The subsequent movement of the currency pair within the market, following your decision of going long or short, will determine whether you make a profit or loss on the trade.

The forex market facilitates over $5 trillion in turnover everyday. Let's have a look at some of the reasons why forex trading is so popular among traders.

Losses can exceed deposits. Ensure you fully understand all risks involved and seek independent advice if necessary.
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