What Forex Is — the Biggest Market in the World

Welcome — if you are reading this chapter, you are at the real starting point of trading. I will take you through it step by step, skipping nothing.

What Forex is

Forex stands for Foreign Exchange — literally, the exchange of one country's currency for another.

Have you ever exchanged money for an overseas trip — handing over baht and receiving dollars? That is forex in its simplest form.

The forex market is where the whole world exchanges one currency for another — and the exchange rate moves all the time.

Trading forex = speculating on the rise and fall of exchange rates

When you "trade" forex you are not exchanging real money to hold — you are speculating on whether a currency pair will get "stronger" or "weaker." - Think it will strengthen → you Buy - Think it will weaken → you Sell - Guess right = profit · guess wrong = loss

The biggest market in the world

Forex is the largest financial market on earth — with more than 7 trillion dollars changing hands per day (an approximate figure) · many times larger than every stock market combined.

What that size means for you: - Very high liquidity — there is always someone to take the other side, whenever you buy or sell - No one can rig the whole market — it is too big for any single player to control - Open 24 hours Monday-Friday — because the world has many time zones

Currency Pair — you always trade a "pair"

A currency has no price on its own — it only has value when compared against another currency. So we always trade a pair.

Example: EUR/USD = the euro against the US dollar - The first (EUR) = the Base currency - The second (USD) = the Quote currency - A price of EUR/USD = 1.0850 reads: "1 euro exchanges for 1.0850 dollars"

If you Buy EUR/USD = you bet the euro will strengthen against the dollar If you Sell EUR/USD = you bet the euro will weaken against the dollar

There are 3 groups of pairs: - Major — pairs with USD, the most popular (EUR/USD, GBP/USD, USD/JPY) · a narrow spread — suited to beginners - Minor / Cross — pairs without USD (EUR/GBP, EUR/JPY) - Exotic — pairs with a small-country currency (USD/THB) · very volatile, a wide spread — beginners should avoid these first

Why prices move

Currency prices are driven by supply and demand — the more a currency is wanted, the stronger it gets · the main factors: - Interest rates set by each country's central bank - Economic news — inflation, employment, GDP - Big events — politics, war, crises

You do not need to be an economist yet — just know that prices move for reasons, they are not random.

Sessions — the market's working hours

The market is open 24 hours, but it is not equally active throughout · there are 3 main sessions: - Asian — quiet, a narrow range - London — starts to come alive - New York — the most active · the London + NY overlap is when the market is most alive

> Forex is speculating on the rise and fall of currencies, always traded as a pair, in the biggest market in the world · understand just this first — the next chapter digs into the "vocabulary" you must know

Let's go to Chapter 2