Module 1: Forex Fundamentals
What is Forex?
5 min read
Forex is the global market where currencies are exchanged for one another.
The basic idea
Forex (foreign exchange, or FX) is the market where one currency is exchanged for another. When a traveller swaps pounds for euros, or a company pays a foreign supplier, they are taking part in the forex market.
Exchange rates move constantly because supply and demand for each currency change with trade flows, interest rates, economic data and investor sentiment.
Why people trade it
Some participants need currencies for real business. Others speculate: they try to profit from changes in exchange rates. Retail traders usually speculate through a broker, often using leveraged products such as spot FX or CFDs.
Speculation is risky. Prices can move against you quickly, and leverage magnifies losses as well as gains.
Example: A simple exchange
If EUR/USD is 1.1000, one euro buys 1.10 US dollars. If the rate rises to 1.1100, the euro has strengthened against the dollar.
Key takeaways
- Forex is the exchange of one currency for another.
- Rates move with supply, demand, economics and sentiment.
- Speculative trading carries a real risk of loss.
Educational content only, not financial advice. Trading forex and CFDs involves significant risk of loss.