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.
What Is Forex Trading?
About Lesson

There are a few choices when it comes to forex that individual traders can take. The simplest way is to buy a currency pair on the spot market and hold it. For example, you purchase EUR in the USD/EUR pair. If the counter currency appreciates, you can sell it for your base currency and take home a profit.

You can also leverage your funds to increase the amount of capital available to you. In this case, you can trade using borrowed funds as long as you cover your losses. Another possibility to consider are forex options that allow you to buy or sell a pair for a set price on a specific date. Futures contracts are also popular, obliging you to enter into a trade at an agreed-upon price in the future.

One exciting aspect of forex trading is the possibility of making a profit through interest rate differentials. Central banks worldwide set differing interest rates that provide investment opportunities for forex traders. By exchanging your cash and depositing it in a foreign bank, it’s possible to earn more money than leaving your funds at home. 

There are extra costs, however, including remittance fees, banking charges, and differing tax regimes. You should consider all the possible additional costs to make your strategies work. Arbitrage opportunities and gains are often minimal, so your margins will be tight. An unexpected fee can wipe out all your expected gains.