Forex trading is the act of buying and selling currencies on the foreign exchange market — the world’s largest and most liquid financial market.
What Is Forex Trading?
Forex trading, also known as foreign exchange trading or FX trading, is the process of exchanging one currency for another in order to profit from changes in exchange rates. It’s how traders speculate on whether one currency will strengthen or weaken against another.
💱 How Currency Pairs Work
In Forex, all trades happen through currency pairs — two different currencies quoted together. You’re always buying one currency while simultaneously selling another.
Each currency pair has:
- Base currency (the first listed)
- Quote currency (the second listed)
The exchange rate tells you how much of the quote currency is needed to buy one unit of the base currency.
👉 For example, in the EUR/USD pair:
- EUR is the base
- USD is the quote
If EUR/USD = 1.1000, it means 1 euro equals 1.10 US dollars.
If the rate moves to 1.1200, the euro has strengthened — now 1 euro is worth 1.12 dollars.
📈 Buy vs Sell in Forex
When trading Forex, you’re speculating on whether the base currency will rise or fall against the quote.
- Going long (buy) means you believe the base currency will go up in value.
Example: You buy EUR/USD expecting the euro to rise vs the dollar.
- Going short (sell) means you think the base currency will go down in value.
Example: You sell EUR/USD expecting the euro to weaken against the dollar.
Every trade involves both a buy side and a sell side, and your profit or loss depends on the direction the market moves after you enter.
📌 Forex trading is fast-moving, and prices change by the second. That’s why many beginners use a Forex demo account (like in the Forex Game app) to practice before trading with real money.
Types of Currency Pairs in Forex Trading
Currency pairs in Forex are grouped into major, minor, and exotic pairs — each with different levels of liquidity, volatility, and trading cost.
- Major pairs include the US dollar and other top global currencies, like EUR/USD, USD/JPY, or GBP/USD. These are the most liquid and typically offer the tightest spreads.
- Minor pairs, or cross-currency pairs, don’t involve the US dollar. Examples include EUR/GBP or AUD/JPY. They’re still widely traded but often have slightly wider spreads.
- Exotic pairs combine a major currency with one from an emerging economy, such as USD/TRY or EUR/THB. These pairs can be more volatile and less liquid, so they require extra caution.
How Does Forex Trading Work?
Forex trading works by exchanging one currency for another in hopes of profiting from changes in their exchange rate. With over $7.5 trillion traded daily, the forex market is the most liquid financial market in the world.
Here are the key elements that explain how it works:
💱 Bid and Ask Prices
Each forex trade involves two prices:
- Bid: The price a broker will pay to buy the base currency.
- Ask: The price a broker will sell the base currency for.
The difference is called the spread, and it’s one of the main trading costs.
📊 Speculation
Most retail forex traders aim to speculate on currency price movements.
You go long if you expect the base currency to rise, or short if you expect it to fall. Profits come from correctly predicting direction — but losses are also possible.
🌊 Liquidity
Major pairs like EUR/USD or GBP/USD are extremely liquid, meaning you can open and close trades quickly with minimal slippage. Exotic pairs are less liquid and may carry wider spreads.
🌍 Accessibility
Thanks to low capital requirements and leverage, forex trading is accessible to retail traders around the world. However, leverage increases both potential gains and risks.
🔁 Diversification
Some traders use forex to diversify their portfolio or spread risk across multiple currency pairs — including majors, minors, and exotics.
⏰ Flexibility
The forex market is open 24 hours a day, 5 days a week, allowing traders in any time zone to find opportunities that fit their schedule.
🛡️ Risk Management
Forex can also serve as a hedging tool. Businesses and investors use it to protect against currency fluctuations that could affect international profits.
What Influences the Prices of Forex Currency Pairs?
Currency prices in the Forex market are constantly changing. These shifts are driven by real-world factors — from interest rates and inflation to political developments and commodity prices. Understanding these drivers is key to anticipating currency movements and building smarter trading strategies.
Let’s look at the main categories that influence Forex rates:
📊 Economic Indicators
Economic strength boosts confidence in a currency. Key reports like GDP, inflation, and employment data offer insight into how well a country is performing.
→ Example: A strong US jobs report can lead to USD strength.
🗳️ Political Events
Political stability attracts investors; instability scares them off. Elections, government changes, or international conflict can shift currency demand fast.
→ Example: Political uncertainty in the UK can weaken the GBP, while the USD may rise as a safe haven.
💰 Interest Rates
Central bank decisions play a major role. Higher interest rates tend to strengthen a currency, as investors seek higher returns.
→ Lower rates may weaken a currency as capital moves elsewhere.
🛢️ Commodity Prices
Some currencies are tied to natural resources. Rising oil or gold prices often boost commodity-linked currencies like the CAD (Canada) or AUD (Australia).
→ Example: If oil surges, the Canadian dollar often strengthens.
📉 Inflation & Purchasing Power
High inflation can reduce a currency’s value over time. Traders watch these trends to forecast long-term direction and relative strength.
→ Economies with stable inflation tend to have stronger, more stable currencies.
What Are the Forex Trading Hours?
One of the key advantages of Forex trading is its 24-hour availability, five days a week. Thanks to the global nature of currency markets, there’s always a market open somewhere in the world — from Monday morning in Sydney to Friday evening in New York.
Forex trading hours follow the opening and closing times of the world’s largest financial hubs. The market is typically divided into four major sessions:
🌍 Major Forex Trading Sessions
| Session | Summer (UTC) | Winter (UTC) |
| Sydney | 10:00pm – 7:00am | 9:00pm – 6:00am |
| Tokyo | 11:00pm – 8:00am | 11:00pm – 8:00am |
| London | 7:00am – 4:00pm | 8:00am – 5:00pm |
| New York | 12:00pm – 9:00pm | 1:00pm – 10:00pm |
The highest trading volume often occurs during the overlap between London and New York sessions, as both markets are active and liquidity is at its peak.
📌 Unlike stock markets, which operate on fixed hours, Forex never sleeps — it simply moves from one region to the next.
What Are Lots in Forex Trading?
In Forex trading, a lot is a unit that defines the size of your trade. It helps standardize how much of a currency you’re buying or selling — and directly affects how much you gain or lose per pip movement.
📏 Common Lot Sizes
Each lot type represents a fixed number of units of the base currency. The larger the lot, the higher the pip value — which means both potential profits and risks increase.
| Lot Type | Units of Base Currency | Value per Pip (USD) |
| Standard | 100,000 | $10 |
| Mini | 10,000 | $1 |
| Micro | 1,000 | $0.10 |
| Nano | 100 | $0.01 |
💡 Example
If you’re trading 1 standard lot (100,000 units) of EUR/USD, a 1 pip move equals a $10 change — either profit or loss. If you’re using a micro lot (1,000 units), the same pip is worth just $0.10. That’s why choosing the right lot size is a key part of risk management.
Using the Forex Game app, you can test all these lot sizes in a safe demo environment — no real money at risk. It’s the perfect way to learn how pip values and lot sizes impact your trades.
What Are Forex Swaps?
Forex swaps, or FX swaps, are agreements between two parties to exchange currencies twice: once now, and once again at a later date. This tool is mainly used by banks, institutions, or large investors — but it’s important for retail traders to understand the concept too.
🔁 How Forex Swaps Work
- The first exchange happens at the current exchange rate (called the near leg).
- The second exchange is scheduled for a future date, at a different rate that reflects the interest rate difference between the two currencies (the far leg).
So, it’s like temporarily swapping currencies with a plan to switch them back later — but at rates adjusted by market interest rates.
Why Do Forex Swaps Matter?
There are different reasons why traders or businesses use FX swaps:
- Short-term swaps (days or weeks): Often used to manage cash flow, reduce risk on short-term trades, or take advantage of interest rate differences.
- Long-term swaps (months or years): Common for international businesses managing loans or income in foreign currencies.
In most retail platforms, including Forex Game, you won’t trade swaps directly — but you may come across swap fees (also called rollover) if you keep positions open overnight. Learning how swaps affect your positions is part of becoming a more informed trader
Forex Trading Strategies to Consider
As you gain experience in the currency market, you’ll discover that successful forex trading often comes down to choosing the right strategy — and sticking to it with discipline. Most strategies rely on either technical analysis, fundamental analysis, or a mix of both.
📈 Trend Trading Strategy
This strategy focuses on identifying and riding long-term price trends — either upward (bullish) or downward (bearish). Traders using this method often apply indicators like moving averages, trendlines, or momentum oscillators to stay in the trade as long as the trend lasts.
⚡ Scalp Trading Strategy
Scalping involves executing many quick trades throughout the day, aiming to capture small price movements. Scalpers need fast decision-making, a reliable platform, and solid risk control, as trades may last just seconds or minutes.
🔄 Swing Trading Strategy
Swing traders hold positions for a few days to weeks, trying to profit from medium-term market moves. They often use a combination of technical signals and fundamental triggers (like economic news or interest rate announcements) to plan entry and exit points.
💡 Ready to Practise Your Strategy?
Learning strategies is one thing — applying them without risking real money is another. With the Forex Game app, you can test-drive popular trading strategies like trend following, scalping, or swing trading in a safe, simulated market environment.
✅ No risk.
✅ Real market data.
✅ Perfect for beginners and strategy testing.
