Course Content
What Is Forex Trading?
Forex is the world's largest market by trading volume and liquidity. Brokers, businesses, governments, and other economic agents trade currencies and forex derivatives to enable international commerce. Traders also use the market for speculative reasons. There are various arbitrage opportunities to be found with exchange rates and interest rates, making the market a popular one to trade in large volume or on leverage. The forex market consists of fiat currency pairs and their relative market prices. These pairs are typically bought and sold by the lot. A standard lot contains 100,000 units of the pair's base currency, but other smaller sizes are available, ranging down to 100 units. Traders commonly use leverage to increase the amounts they can invest with their capital. You can also offset risk by using forwards and swaps to trade a currency pair for a specific price in the future. Combining these two instruments with other trading strategies and products creates a variety of investment opportunities for forex traders.
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What Is Forex Trading?
About Lesson

Suppose you enter a futures contract to buy one lot of USD/EUR at 0.8400 (purchase $100,000 for €84,000) in a year. You may, perhaps, be selling in the Eurozone and want to repatriate your profits in one year. A futures contract removes the risk of a possible appreciation in the U.S. dollar against the euro and helps you better plan your finances. In this case, if the US dollar appreciates, each euro will purchase fewer dollars when repatriating the funds.

If the US dollar appreciates and USD/EUR is at 1.0000 in a year, without a futures contract, the spot rate would be $100,000 for €100,000. However, instead of this rate, you would enter the previously agreed-upon contract of one lot of USD/EUR at 0.8400 ($100,000 for €84,000). In this simple example, you will have saved on a cost of €16,000 per lot, not considering any fees.

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