Forex is the market for exchanging one currency for another. Trading it means taking a position on the rate between two of them. Everything else is detail built on that one idea.
Forex (foreign exchange) is the market where currencies are traded against each other. You always trade a pair, buying one currency means selling the other. Buying EUR/USD is a bet that the euro strengthens against the dollar. It is the largest financial market in the world, runs 24 hours a day from Sunday evening to Friday evening, and has no central exchange.
Every cross-border transaction needs a currency exchange. An importer paying a European supplier, a fund buying US equities, a tourist at an airport kiosk. All of it flows through the same network of banks quoting prices to each other. That network is the foreign exchange market, and it turns over trillions of dollars a day.
There is no exchange building and no central order book. Prices are quoted bilaterally, which has one consequence you feel directly: your broker's price is its own, built from the liquidity providers it deals with. Two brokers will show slightly different prices for EUR/USD at the same instant, which is why a signal's level should always be checked against your own chart.
Retail traders are a tiny fraction of the volume, and speculation is a minority of it overall. That matters because it means the market is not primarily driven by people trying to predict it.
Currencies are quoted in pairs, written base/quote. In EUR/USD = 1.0850, EUR is the base and USD is the quote, and the number says one euro costs 1.0850 US dollars.
Buying EUR/USD means buying euros and selling dollars. You profit if the euro strengthens against the dollar. Selling means the reverse. And unlike stocks, there is nothing unusual about being short: you are simply long the other currency.
Pairs are grouped into majors (everything against the US dollar: EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, NZD/USD), crosses (no dollar: EUR/GBP, GBP/JPY, EUR/JPY), and exotics (a smaller or emerging-market currency, with wide spreads and jumpy behaviour).
Every quote has two prices: the bid you can sell at and the ask you can buy at. The gap between them is the spread, and it is the cost of entering, which is why a trade begins slightly negative.
A pip is the standard smallest increment: the fourth decimal place for most pairs, the second for yen pairs. EUR/USD moving 1.0850 → 1.0851 is one pip. Your platform shows a fifth digit, the pipette, which is a tenth of a pip.
A lot is the unit of position size. A standard lot is 100,000 units of the base currency, a mini lot 10,000, a micro lot 1,000. On a pair quoted in dollars, one pip on a standard lot is $10, on a mini lot $1, on a micro lot $0.10.
Put together: buying one standard lot of EUR/USD at 1.0850 and selling at 1.0900 is 50 pips at $10 each, or $500. Losing the same distance costs the same amount. The pip calculator handles the pairs where the arithmetic is less direct.
A standard lot of EUR/USD is $108,500 of exposure. Almost nobody has that in an account, which is where leverage comes in: at 1:100, your broker requires roughly 1% of the position value as a deposit (about $1,085) and holds it while the trade is open.
That held amount is margin. It is collateral, not a fee, and it is returned when you close. What leverage changes is how much margin a position needs. It does not change how much you lose per pip, which is decided entirely by position size.
This distinction is where most beginners go wrong. High leverage is not inherently dangerous; it is dangerous because it removes the natural ceiling on position size. At 1:30 a small account cannot open a huge position. At 1:1000 it can, and the temptation is real. The leverage calculator shows the difference between what your account allows and what you are actually using.
Retail forex is traded almost entirely through CFDs, contracts for difference. You never receive euros. You hold a contract with your broker that settles the difference between your opening and closing price.
Three practical consequences: you can short as easily as you can go long; you pay or receive swap on positions held overnight, reflecting the interest differential plus the broker's markup; and your counterparty is your broker, which is why the entity holding your account and its regulator matter. See the broker checklist.
Trading foreign exchange and other leveraged instruments carries a high level of risk and can result in the loss of some or all of your capital. Signals and educational content provided in MarketPro are for informational purposes only and do not constitute investment advice, a recommendation, or a solicitation to trade. Past performance is not indicative of future results. You are solely responsible for your own trading decisions. Only trade with money you can afford to lose, and seek independent advice if necessary.
A structured academy with lessons, quizzes and streaks ships inside MarketPro, alongside one free vetted signal a day.
Not investment advice. Past performance is not indicative of future results.