Forex (short for foreign exchange, also written FX) is the global market where currencies are swapped for one another. It is the largest financial market in the world. The Bank for International Settlements’ most recent triennial survey put average turnover at roughly $7.5 trillion a day in April 2022, far more than every stock exchange combined.
Most of that volume is banks, corporations, funds and central banks moving money for trade, investment and hedging. Retail traders are a small slice, but thanks to online brokers anyone can now speculate on exchange rates with a small account.
How currency pairs work
Currencies are always quoted in pairs, because you are always buying one currency and selling another at the same time. In EUR/USD = 1.0850:
- EUR is the base currency. It is the one you are buying or selling.
- USD is the quote currency. It is what the price is measured in.
- The price means 1 euro costs 1.0850 US dollars.
If you think the euro will strengthen against the dollar you buy EUR/USD (go long). If you think it will weaken you sell (go short). Your profit or loss depends on how far the price moves and how big your position is. See what is a pip and lot sizes explained.
Majors, crosses and exotics
- Majors pair the US dollar with another major currency: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD and NZD/USD. They are the most liquid and usually have the tightest spreads.
- Crosses pair two major currencies without the dollar, such as EUR/GBP, GBP/JPY or AUD/NZD.
- Exotics pair a major with an emerging or smaller-market currency, such as USD/ZAR or USD/MXN. Spreads are wider and moves can be sharper.
You can compare all of them on our markets page, which shows each pair’s average daily range and one-year performance.
When the market is open
There is no central exchange. Forex trades over the counter between banks around the world, so it runs 24 hours a day from Sunday evening to Friday evening (New York time). Activity moves from Sydney to Tokyo to London to New York. The busiest window is when London and New York overlap. Our market hours tool shows these times in your own city.
What moves exchange rates
- Interest rates. Higher rates tend to attract capital. Central bank decisions from the Federal Reserve, ECB, Bank of England and Bank of Japan are some of the biggest scheduled events.
- Inflation and economic data. Reports such as US non-farm payrolls, CPI inflation and GDP change expectations for future rates.
- Risk sentiment. In stressed markets money tends to flow to “safe haven” currencies like the US dollar, Japanese yen and Swiss franc.
- Trade and commodities. The Australian and Canadian dollars and the Norwegian krone often move with commodity prices.
- Politics and surprises. Elections, policy changes and unexpected news can reprice a currency in minutes.
How retail traders access forex
Most individuals trade through a broker using leveraged products such as spot FX or CFDs. Leverage means you only put down a fraction of the trade’s value as margin. That magnifies gains and losses, which is why most retail accounts lose money. Read leverage and margin explained and risk management before you place a real trade.
Choose a broker that is regulated by a credible authority where you live, and start on a demo account until you understand exactly how much each pip is worth to you.
Where signals fit in
A forex signal is a trade idea with a defined entry, stop loss and target. Signals can save research time and show you how experienced traders frame a setup, but they are not a guarantee and should never replace your own risk rules. Our guide on how to read a forex signal explains every part of one.