Forex trading involves the exchange of different currency pairs.

The trade takes place between one currency and another. For instance, if the USDGBP currency pair is priced at 0.66, it means 1 US Dollar is worth 0.66 British Pounds. The goal in Forex trading is to determine whether the US Dollar will rise or fall in value relative to the British Pound. If the price increases, the trader would buy the USDGBP pair.

If the price decreases, for example from 0.66 to 0.64, it indicates that the US Dollar has weakened. Conversely, if the price moves up from 0.66 to 0.69, it means the US Dollar has gained strength against the British Pound. You’ll often encounter terms like “long” and “short,” where “long” refers to the US Dollar and “short” refers to the British Pound, as the GBP price is quoted in USD.

Another key term is “major,” which refers to the most commonly traded global currency pairs, such as AUDUSD, USDJPY, EURUSD, USDCAD, USDCHF, and GBPUSD, all of which include the US Dollar. Pairs that do not include the Dollar are referred to as “cross pairs.”

Forex trading doesn’t involve actual physical currency transactions. Instead, all trades and swaps happen online, meaning the market operates based on currency speculation. It’s estimated that over 4 trillion dollars are exchanged globally each day, with transactions involving a range of financial instruments such as futures, forwards, and currency swaps.

Forex trading operates continuously 24 hours a day during the week, with breaks on weekends.

For more in-depth Forex information, visit our learning section.