What is Forex Trading?

The Foreign Exchange market (commonly referred to as Forex or FX) is the largest and most liquid financial market in the world, with over $7.5 trillion traded daily as of 2026. Unlike stock markets, which operate on centralized exchanges, the forex market is a decentralized, over-the-counter (OTC) marketplace where buyers and sellers exchange national currencies.

How Currency Pairs Work

In forex, currencies are always traded in pairs. When you trade, you buy one currency and simultaneously sell another. A currency pair consists of: * Base Currency: The first currency listed in the pair (e.g., EUR in EUR/USD). * Quote Currency: The second currency listed (e.g., USD in EUR/USD).

For example, if the EUR/USD exchange rate is 1.0850, it means you need 1.0850 US Dollars to buy 1 Euro.

Main Categories of Pairs: 1. **Majors**: The most liquid pairs, always containing the US Dollar (e.g., EUR/USD, GBP/USD, USD/JPY). 2. **Minors / Crosses**: Pairs that do not include the USD but contain major currencies (e.g., EUR/GBP, AUD/NZD). 3. **Exotics**: A major currency paired with a developing country's currency (e.g., USD/ZAR, USD/MXN). Exotics have wider spreads and higher volatility.