Forex Trading

Forex markets can offer potential for big gains with little investment. But they also come with significant risks. Learn how forex markets work and strategies to navigate them.

Frequently Asked Questions

  • What is forex trading and how does it work?

    Forex trading means trading currencies in the foreign exchange market. Currencies trade in pairs, such as EUR/USD, that denote the value of one currency relative to the other. You place your trades based on the expectation of price fluctuation for the pair. Price changes are measured in pips and trades are placed in lots (standard lot = 100,000 units of a currency).

    Forex trading allows for a lot of leverage and can be risky due to sudden price swings.

  • How do I start forex trading?

    Forex trading offers profit potential from big bets without too much capital involved. While that sounds alluring, such leverage can be risky. To start off, you’ll need an account with a forex broker. Before you place your trades, learn about the currencies you want to trade, consider hedging techniques and practice with a demo account prior to risking your money. 

  • How do I make money trading forex?

    It's not easy to profit from day trading, even seasoned traders struggle with that. For day trading forex, with quick price swings and high leverage, the key is risk management. Follow the 1% rule for how much money you risk and use stop losses to manage risk on individual trades. Also keep an eye on your win rate as well as the risk/reward ratio and adjust your strategy accordingly.

  • What is leverage in forex trading?

    Leverage means placing a bet that’s worth more than the funds you have. Simply put, it means trading with borrowed money. The CFTC restricts leverage for US retail forex traders to 50:1 on major currency pairs and 20:1 for all others. That means that for every $1 margin you have in your account, you can place a trade in a major currency pair worth up to $50. 

  • What are pips in forex trading?

    A pip stands for either "percentage in point" or "price interest point," and represents the basic movement in a currency pair. For most currency pairs it is equal to 1/100 of a percentage point, or one basis point counted by a change in the fourth decimal place. Pairs containing the Japanese Yen (JPY) are an exception, where the pips are counted in the second place after the decimal in price quotes.

  • What are the forex trading hours?

    Forex markets are global, and most major centers operate five days a week for at least 8 hours a day. Overlapping time zones allows for 24-hour forex trading but can also influence specific currency pairs. New York market opens at 1 p.m. GMT and closes at 10 p.m. GMT. Sydney market opens at 10 p.m. GMT and closes at 7 a.m. GMT. The Tokyo market opens at midnight GMT and closes at 9 a.m. GMT and the London market opens at 8 a.m. GMT and closes at 4 p.m. GMT.

  • How do I make money in forex without trading?

    In its simplest form, a forex transaction occurs when you exchange currency while you’re on holiday. But investing in currency exchange-traded funds (ETFs) could be an easy option to gain exposure to forex markets without taking on the risks of trading currency pairs. They are also a great way to hedge against currency risks.

  • How do I open a forex trading account?

    You need a forex trading account to trade in the forex markets. To do that, you would need to fill in an application with a forex broker. The broker will need to verify all your information and since forex trading requires leverage, the broker needs to give you approval to trade on margin. The next step is to link a payment method to your account and deposit any minimum balance your broker requires.

Key Terms

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