Forex
What Is Forex, What Is It For, and Where to Trade It
Forex is the largest market on earth — trillions of dollars change hands every day. Here's what it's for and how ordinary people access it.
What is forex?
Forex (FX) is the global market for exchanging one currency for another. It trades over the counter through a network of banks and brokers, 24 hours a day from Monday morning in Asia to Friday evening in New York. Prices are always quoted as a pair, such as EUR/USD: how many dollars one euro buys.
What is the forex market used for?
- International trade — importers and exporters must convert revenue and pay suppliers in other currencies.
- Hedging — companies and funds lock in exchange rates to protect margins.
- Travel and remittances — everyday currency conversion.
- Speculation — traders take positions on interest rate and macroeconomic differences between countries.
- Reserve management — central banks hold and manage foreign currency reserves.
Major, minor and exotic pairs
- Majors — EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, NZD/USD. Tightest spreads and deepest liquidity.
- Minors — crosses without the US dollar, such as EUR/GBP or EUR/JPY.
- Exotics — a major against an emerging currency (USD/TRY, USD/ZAR, USD/MXN). Higher volatility, wider spreads.
What moves currency prices?
Interest rate decisions and expectations, inflation data, employment figures, GDP growth, trade balances, political stability, commodity prices for exporters, and global risk sentiment. Interest rate differentials are the single most influential long-run driver.
Where can you trade forex?
- Regulated FX/CFD brokers — the standard retail route. Always check the broker's licence with your national regulator.
- Futures exchanges — currency futures on venues such as the CME, with centralised clearing.
- Banks — spot and forward contracts for corporate and high-value clients.
- Currency ETFs — exchange-traded exposure to a currency without a margin account.
- Physical exchange — bureaux de change and banks for holding actual foreign cash.
Leverage: the core risk
Retail forex is usually traded with leverage, meaning a small deposit controls a much larger position. Leverage multiplies gains and losses equally — a 1% adverse move at 30:1 leverage wipes out roughly 30% of your margin. Most retail accounts lose money, which is exactly why regulators cap leverage in many jurisdictions.
Costs
The spread between bid and ask, commissions, and overnight swap (financing) charges for positions held past the daily rollover.
Live exchange rates for major, minor and emerging market currencies are available on the NexPrices forex page.