What is forex? A straight explanation for beginners

Forex is the global currency exchange — where banks, companies and investors swap one currency
for another. This page explains how it works. It promises nothing beyond that.

1. It is always a pair

You never buy “dollars” in the absolute. You always buy one currency with another, which
is why everything in this market is a pair: EUR/USD, USD/JPY,
GBP/USD.

Buying EUR/USD means buying euros and selling dollars in the same instant. If the euro
strengthens against the dollar, you profit.

2. Size and hours

By volume this is the largest market in the world, and it runs 24 hours a day, five days
a week — from the Sydney open on Sunday evening UTC to the New York close on Friday.

There is no central exchange as there is for shares. Prices form across a network of banks and
institutions, so at any given moment two venues can quote slightly different numbers.

3. Who you actually trade through

Retail traders have no direct access to the interbank market. You trade through a
broker, which aggregates prices from liquidity providers and lets you open
positions far smaller than interbank size.

4. Leverage — get this right at the start

Daily moves in a currency pair are usually under 1%. For that to mean anything on a small
account, the broker lends against your margin. That loan is leverage.

At 1:100, your $1,000 controls a $100,000 position. The part that matters:
leverage magnifies losses exactly as much as gains. A 1% move against you wipes out
100% of the margin behind that position.

This is why most beginners lose money quickly — not because they read the market wrongly, but
because they opened a position far too large for the account behind it.

5. Where the money comes from, and where it goes

Profit is the difference between your entry and your exit. Costs come from three places:
the spread, commission on some account types, and swap
if you hold overnight.

6. Three things to do before funding an account

1. Learn to size a position from your
   risk rather than picking a lot size by feel. This matters more than any indicator.
2. Run a demo for at least a month
   at the exact size you intend to trade with real money.
3. Check the broker’s licence on
   the regulator’s own register, not on the
   broker’s website.

7. The part worth saying plainly

Most retail accounts in this market lose money. Brokers regulated in Europe are required to
publish that figure, and it usually sits between 70% and 80%.

That is not a reason to stay away. It is a reason to come in with money you can afford to lose,
to learn seriously, and to treat cost and risk control as the main job rather than an afterthought.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.