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
Forex or FX trading (from foreign exchange) is the purchasing and selling of sovereign currencies and other forex products. When exchanging currencies at a bank or bureau de change, the rates we find are determined directly by what happens in the forex market.
Exchange rate movements are based on a mixture of economic conditions, world events, interest rates, politics, and other factors. As a result, forex is highly liquid and has the largest trading volume compared to other financial markets. 

The forex market comprises two main activities: trading facilitating economic transactions and speculative trading. For companies and other entities operating in international markets, purchasing and selling foreign currencies are a must. Getting your funds back home or purchasing goods abroad is a key forex market use case.

Speculators make up the other side of FX trading. Short-term, high-volume trading that takes advantage of very small fluctuations in currency prices is common. Forex is a market full of arbitrage opportunities for speculators, in part explaining the vast trading volume in the market. 

Traders also look to make money with long-term opportunities such as fluctuating interest rates. Economic events and geopolitics also cause serious fluctuations over time in the currency markets. By purchasing a currency now and holding, there’s profit to be made long-term. You can also agree on exchange rates years in advance with futures contracts in a bet for or against the market.

Forex trading can be challenging for smaller users. Without borrowing or having a high amount of initial capital, arbitrage and short-term trading become much more difficult. This aspect has led to international banks and financial institutions providing most of the volume we see in the foreign exchange market.