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

The forex market isn’t just about speculation. Banks, businesses, and other parties who need access to foreign cash take part in FX trading to facilitate international transactions. Companies also in advance agree on FX rates to fix the costs of future currency exchanges, known as hedging. Another use case is for Governments to build up reserves and meet economic objectives, including currency pegging or boosting imports/exports.

For individual traders, there are attractive features to the forex market too:

  • Leverage allows even small traders to invest with larger sums of capital than they directly have access to.
  • The entry costs are low, as it’s possible to buy small amounts of currency. Buying a share in the stock market may set you back thousands of dollars, compared to entering the FX market for $100.
  • You can trade at almost any time, making forex suitable for all schedules.
  • There’s high liquidity in the market, as well as a low bid-ask spread.
  • Options and futures are standard products. Shorting the market is possible for traders who don’t just want to spot buy and sell at the current market price.