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.
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What the Net Interest Rate Differential (NIRD) Tells Us
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) Definition
The abstract image of the business man hold the virtual hologram on hand. The concept of currency, financial, online, businessman, information technology and internet of things.
Inside the Nominal Effective Exchange Rate (NEER)
Rows of golden coins with a graph.
Foreign Currency Fixed Deposit (FCFD)
Foreign Currency bills laid out
Legal Tender Definition
Electronic currency exchange notice board.
Exposure Netting
Curved skyscraper against blue sky
Eurocurrency Market
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Temporal Method
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European Currency Unit (ECU) Definition
woman at desktop looking at financial charts
Protect Your Foreign Investments From Currency Risk
Global Currency Trade
The U.S. Dollar's Unofficial Status as World Currency
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Digital Currency Exchanger (DCE)
Business people zooming in on graph on digital tablet.
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Euro currency symbol
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Five and Ten Pound Note Stacks
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Folded american dollar notes making a shape of the dollar currency sign.
Transfer Risk
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Euro Notes Definition
Renminbi Yuan Bills
Chinese Yuan Renminbi (CNY)
Uncovered Interest Arbitrage
What Is an Online Currency Exchange?
two hands on a pile of foreign currency
European Terms
Xenocurrency Definition
Universal Currency Converter Definition
Cambist Definition
Confederate Dollar (CSD)
Forex Club Definition
French Franc (F) Definition
AUD (Australian Dollar) Definition
VND (Vietnamese Dong)
What Is the Irish Pound (IEP)?
Continentals Definition
What Does “Netherlands Antilles Guilder (ANG)” Mean?
Circus Swap Definition
Greek Drachmas Currency
Undrestanding the Greek Drachma
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SKK (Slovak Koruna)
Lewes Pound
Stroud Pound Definition
SEC Form TA-1
What Is a Sectoral Currency?
Cape Verde Escudo (CVE)
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Noon Rate Definition
Gold and Silver Coins and Bullion
Bimetallic Standard
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Guide to Forex Trading