How To Start Forex Trading: A Guide To Making Money with Forex.

Every second, about $850 million changes hands in the foreign exchange (forex or FX) market, making it the world's largest financial marketplace, with daily trading volume reaching $7.5 trillion.1 While dealing in this massive market was once the exclusive domain of banks and financial institutions, online trading platforms have opened the door for individual investors to try their hand at currency trading.

Forex trading involves simultaneously buying one currency while selling another in hopes of profiting from changes in their relative values. For example, if you think the euro will strengthen against the U.S. dollar, you might buy euros and sell dollars, aiming to sell those euros later at a higher price. Thus, forex trading is about anticipating and capitalizing on these currency value shifts.

What Is the Forex Market?

The foreign exchange market is where currencies are traded. Its most striking aspect is how it has no central marketplace. Instead, currency trading is done electronically over the counter (OTC). All transactions occur via computer networks that connect traders worldwide.

The main markets are open 24 hours a day, five days a week (from Sunday, 5 p.m. ET until Friday, 4 p.m. ET). Currencies are traded worldwide, but a lot of the action happens in the major financial centers. A 24-hour trading day begins in the Asia-Pacific region, then moves to major centers in Europe and then to North America, where it ends with the U.S. trading session. The forex market is highly dynamic no matter the time of day, with price quotes changing constantly.

How Does the Forex Market Work?

The FX market is one of two 24-hours-a-day (during weekdays) trading markets, the other being cryptos (though crypto markets don’t pause on weekends). Traditionally, the forex market was dominated by institutional firms and large banks, but its popularity among retail traders has significantly grown over the past decade. There's a caveat: Newer traders in the market have lured in fraudsters looking to take advantage of less knowledgeable investors.

What Is Forex Trading?

At its core, forex trading is about capturing the changing values of pairs of currencies. For example, if you think one currency will gain in value against another, you'll buy one to sell it later at a higher price.

In addition to speculative trading, forex trading is also used for hedging purposes. Individuals and businesses use forex trading to protect themselves from unfavorable currency movements. For example, a company doing business in another country might use forex trading to insure against potential losses caused by fluctuations in the exchange rate.

By securing a favorable rate in advance through forex trades, a firm can reduce financial uncertainty and ensure more stable costs in its domestic currency. Hedging FX risks is an essential part of international business today.