Guide to Forex Trading

Foreign exchange (Forex) trading is the trading of one currency for another on financial markets. These markets determine the exchange rates between currencies and often involve complex derivatives such as swaps. Going from the world of stock trading to that of Forex trading requires learning a whole new set of skills.

Frequently Asked Questions
  • Why do people trade currencies?

    People trade currencies for two main reasons. The first is to hedge against currency fluctuations. If a multinational company wants to ensure that its profits are not disrupted by the swings of a particular currency, it can use forex markets to lock in a particular exchange rate so it can remove that source of volatility from its business. Secondly, people trade currencies because they think they can make money as traders, buying and selling currencies in an attempt to make a profit.

  • What is Forex trading?

    Forex trading, short for foreign exchange trading, is the practice of trading different world currencies on financial markets. Currencies can be traded directly in the spot market or using a variety of derivatives contracts such as forwards, futures, and swaps. Forex spot trading does not occur on an exchange, only over-the-counter (OTC), and goes on 24/7.

  • How much do Forex traders make?

    There’s no set amount, or even a range for what forex traders make. How much you make depends on market conditions, if you’re an independent trader or working for a trading firm, and your skill at trading.

Key Terms

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Norwegian kroner in coins and banknotes in denominations of 50, 100, 200, and 500
Norwegian Krone (NOK) Definition
Gold foreign currency.
Current Rate Method
Net Interest Rate Differential (NIRD) Definition
Shanghai Stock Exchange Building
Chinese Depositary Receipt (CDR)
How Fiat Currency Crises Drive Nations Toward Cryptocurrencies
International banknotes from world major countries using as Forex or financial economy background, US dollar, UK pound, Euro, Japanese yen, Indian rupee, Chinese yuan, Thai Baht.
Non-Deliverable Swap (NDS)
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Nominal Effective Exchange Rate: Definition and Uses
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Foreign Currency Fixed Deposit (FCFD)
Foreign Currency bills laid out
Legal Tender: Definition, Economic Functions, Examples
Electronic currency exchange notice board.
Exposure Netting
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Eurocurrency Market: Definition, History, and Types of Markets
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Purchasing Power Parity: The Big Mac Index
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Temporal Method
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European Currency Unit (ECU) Definition
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Protect Your Foreign Investments From Currency Risk
Global Currency Trade
The U.S. Dollar's Unofficial Status as World Currency
Principal Exchange Rate Linked Security (PERL)
Sawbuck
Digital Currency Exchanger (DCE)
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How Do You Fund a Forex Account?
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Eurozone
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Five and Ten Pound Note Stacks
Black Wednesday: Definition, Causes, Role of George Soros
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Transfer Risk
Competitive Devaluation
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Euro Notes
Renminbi Yuan Bills
Chinese Yuan Renminbi (CNY)
Uncovered Interest Arbitrage
Online Currency Exchange
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European Terms
Xenocurrency
Universal Currency Converter
Cambist
Confederate Dollar (CSD)
Forex Club
French Franc (F)
AUD (Australian Dollar)
VND (Vietnamese Đồng)
Irish Pound (IEP)
Continentals
Netherlands Antilles Guilder (ANG)
Circus Swap
Greek Drachmas Currency
Greek Drachma
Calgary Dollar
SKK (Slovak Koruna)
Lewes Pound
Stroud Pound
SEC Form TA-1
Sectoral Currency
Cape Verde Escudo (CVE)
Currency Binary Option
Noon Rate
Gold and Silver Coins and Bullion
Bimetallic Standard
Trillion-Dollar Coin
Linden Dollar
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Guide to Forex Trading