What is Forex Trading

Forex trading is an acronym for foreign exchange trading and is often referred to as FX trading and currency exchange. Forex is a currency market where currencies are traded against each other, and traders can make a profit or loss from the changing values of currencies over time.

In order to conduct foreign trade and business, currencies need to be exchanged. The rate at which one currency can be exchanged for another is referred to as the currency exchange rate. It is always quoted in pairs like the EUR/USD (Euro vs US dollar). The need to exchange currencies is the primary reason for the forex market being the world’s largest financial market, with an average daily turnover of up to 5 trillion US dollars.

Exchange rates are determined by a variety of factors such as a country’s inflation rate, interest rates, political stability and economic performance. These continually changing factors influence traders’ decisions to buy or sell a currency pair. Forex trading is highly popular and works in a similar way to stock trading in that traders buy low and sell high. Traders typically select a currency pair which they expect to see shift in value and place a position accordingly.

Leveraged trading

Leveraged Trading

Forex trading, as with spread betting, allows you to trade with leverage. This means that one only needs to put in a small amount of the actual market price in order to place a trade. In this way, leverage enables you to make larger trades than the capital available in your account would allow with regular trading. The amount of leverage available in the forex market makes it an appealing avenue for many speculators.

However, although trading on leverage magnifies potential gains, it also increases the risk of losses. Investors can realise large gains when rates change favourably, but also incur the risk of equally large losses if rates move against them. This makes it essential for traders to have a thorough understanding of the forex market before committing to a trade – and demonstrates why it is important for new traders to take time to learn how to trade forex. Forex has a great deal of potential for the savvy trader, but education, strategy and patience are needed.

ETX Capital offers currency pairs with maximum leverage of up to 200:1 (400:1 on the MT4 platform*). Why not have a look at our Forex spreads on currency markets and select a pair that best suits you.

Traders should bear in mind that leverage settings can change based on market conditions and that increasing leverage increases risk.

The global currency market


The currency market is open 24 hours a day during the week, with the main trading centres being New York, London, Frankfurt, Sydney and Tokyo. The FX markets are open from 9pm GMT on Sunday evening, and close at 10pm GMT on Friday evening. As the US trading market closes, markets in the East are opening, enabling you to trade forex online at any time of day. This means that traders can respond to breaking news regarding the currency market, the economy and politics as they occur – in order to attempt to maximise profit, and to minimise losses.

The constant activity and high sensitivity of global currency markets makes Forex trading an exciting, fast-paced avenue for traders.

* Leverage settings are changeable based on market conditions

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