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

Explore Guide to Forex Trading

Small Box in a Newspaper Containing Interest Rates Info
Interest Rate Differential (IRD) Definition and Examples
Norwegian kroner in coins and banknotes in denominations of 50, 100, 200, and 500
Norwegian Krone (NOK) Definition
Gold foreign currency.
Current Rate Method: Overview and Calculations
Net Interest Rate Differential (NIRD) Definition
cross in clouds
Shanghai Stock Exchange Building
Chinese Depositary Receipt (CDR)
Bull and Bear polygonal shape writing by lines and dots over the abstract planet earth particle over the Stock market chart.
Unsterilized Foreign Exchange Intervention
How Fiat Currency Crises Drive Nations Toward Cryptocurrencies
ETF (Exchange Traded Fund) on gold coins with white background
Currency ETF
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): Overview and Examples
Gold Bars
How Gold Affects Currencies
Int'l currency
Big Figure
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.
Nominal Effective Exchange Rate: Definition and Uses
Rows of golden coins with a graph.
Foreign Currency Fixed Deposit (FCFD)
Foreign Currency bills laid out
Legal Tender: Definition, Economic Functions, Examples
Understanding the Correlation Between Oil and Currency
Business people meeting in boardroom
Foreign Currency Convertible Bond (FCCB) Defined, How It Works
Electronic currency exchange notice board.
Exposure Netting
Curved skyscraper against blue sky
Eurocurrency Market: Definition, History, and Types of Markets
McDonald's Big Mac.
Purchasing Power Parity: The Big Mac Index
Business Woman Thinking Account
Temporal Method: What it Means, Examples
What Is a Quid? With History of the British Pound Sterling
close up of different types of currencies
Forex Careers: 5 Professional Designations
Woman Counting Money Euro Banknotes, Business or Stock Market Concept Image
European Currency Unit (ECU) Definition
Yuan vs. Renminbi: What's the Difference?
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
Principal Exchange Rate Linked Security (PERL)
Euro icon.
Currency Union
Asian Currency Unit (ACU)
What Is a Currency Board? Definition, What Does It Do, and Example
What Is the European Monetary System (EMS)? Definition, History
What Burst the Mississippi Bubble?
Foreign Draft
Sawbuck: Origin, History of Slang Term For a $10 Bill
Digital Currency Exchanger (DCE)
Currency Strategist
Currency Strategist
Money from several countries
Currency Adjustment Factor (CAF)
How Did George Soros Break the Bank of England?
Business people zooming in on graph on digital tablet.
How Do You Fund a Forex Account?
Euro currency symbol
Eurozone Definition, History, Member Countries
Full Frame Shot of Paper Currencies on Table
Adjustable Peg
Five and Ten Pound Note Stacks
Black Wednesday: Definition, Causes, Role of George Soros
Folded american dollar notes making a shape of the dollar currency sign.
Transfer Risk
Competitive Devaluation
Best Places to Exchange Currency in Las Vegas
Spot Commodity
A ball made out of puzzle pieces placed on a stack of Euros.
Euro Definition, History, Countries That Use It
Renminbi Yuan Bills
Chinese Yuan Renminbi (CNY)
Uncovered Interest Arbitrage
Online Currency Exchange
two hands on a pile of foreign currency
European Terms
Universal Currency Converter
Confederate Dollar (CSD)
Forex Club
French Franc (F)

Guide to Forex Trading