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

Using a EUR/USD one-year futures contract with a forward rate of 1.4100, you can take advantage of the improved interest rate in the USA and guarantee a fixed return. The forward rate is the agreed FX rate used in the contract.

A bank or broker calculates this rate with a mathematical formula that considers different interest rates and the current spot price. The forward rate adds a premium or discount compared to the spot rate depending on market conditions. In preparation for the arbitrage, we enter a futures contract to buy one lot of EUR/USD at a rate of 1.41 in one year.