What is Forex Trading?

What is the Forex Market?

The foreign exchange (forex) market is the global marketplace for trading national currencies. It operates 24 hours a day, five days a week, connecting banks, hedge funds, corporations, and retail traders who buy and sell currency pairs like EUR/USD or GBP/JPY. With daily turnover above $6 trillion, forex is the most liquid financial market in the world.

Key Features of Forex

• Decentralized: Trading occurs over-the-counter via electronic networks rather than a single exchange.
• Pairs: Every trade involves buying one currency and selling another simultaneously.
• Leverage: Brokers provide leverage so traders can control large notional values with modest capital.
• Round-the-clock sessions: Liquidity follows the Asian, European, and North American trading sessions.

Who Participates?

• Banks and liquidity providers: Quote prices and facilitate large flows.
• Corporations: Hedge currency risk tied to international commerce.
• Governments and central banks: Manage reserves and stabilize exchange rates.
• Retail traders: Speculate on short-term moves or longer-term trends.

Deep Dive

Most edges come from applying clear rules consistently. Expand your analysis beyond a single signal: add context from higher timeframes, recent volatility, session behavior, and catalysts. Define invalidation so a trade becomes obviously wrong fast, keeping losses small while letting winners compound.

Trader Checklist

• Higher‑timeframe bias aligns with the setup.
• Clear level or zone for entry with confluence.
• Pre‑defined stop beyond structure; 2–3R target.
• Session/liquidity supports follow‑through.
• No imminent high‑impact news unless planned.

Strategy Ideas

• Combine structure with momentum confirmation (break/close/acceptance).
• Use partials: scale out at first target; trail remainder.
• Journal results by session and pair to refine timing.

Risks and Limitations

• Thin liquidity widens spreads and distorts signals.
• False breaks around obvious levels—wait for acceptance.
• Overfitting indicators; keep the process simple and robust.

Example

Map bias on the daily chart, mark a zone, and wait on 1H for a close back above with rising participation. Enter on the retest; stop beyond the invalidation wick; target prior swing with room for extension. Record the outcome and context to iterate.