Forex trading, commonly referred to as foreign exchange trading, is the world’s largest financial market.
More than $7 trillion worth of transactions take place here daily.
In this market, one currency is bought and another is sold. For example, if you believe the value of the US dollar (USD) will rise against the euro (EUR), you can trade the USD/EUR pair.
What is Forex Trading?
Forex stands for “Foreign Exchange.”
In this trading, you buy one currency and sell another. Two currency pairs are always traded simultaneously, such as:
EUR/USD (Euro vs. US Dollar)
GBP/JPY (British Pound vs. Japanese Yen)
If you believe the value of the euro will rise, you buy EUR/USD. Buying is also known as going long.
If you believe the dollar will strengthen, you can sell it. Selling is also known as going short.
How does Forex Trading work?
The Forex market is not a physical exchange, but a digital network that connects banks, brokers, and investors.
This market is open 24 hours a day, five days a week (Monday to Friday).
Trading takes place in three main sessions:
- Asian Session (Tokyo)
The Asian Session is the time in the forex market when major financial centers in Asia, such as Tokyo, Hong Kong, Singapore, and Sydney, are open. This is why it’s also called the Tokyo Session, as it sees more movement in Asian currencies.
Time (GMT): 12:00 midnight to 9:00 am
- European Session (London)
The European Session is the time when major European financial centers, such as London, Frankfurt, Paris, and Zurich, are open.
This is considered the busiest and most liquid session in the forex market.
Time (GMT): 7:00 AM to 4:00 PM
During this time, when the London market opens, the Asian session (Tokyo) is about to close, causing the two sessions to overlap for a while—and that’s where most trading occurs.
- American Session (New York)
The American Session, also known as the New York Session, is one of the three main trading sessions in the Forex market. This session is based on New York City time in the United States and is considered the most active trading session in the world.
It has higher volume and liquidity than all other sessions. News also flows heavily during this session. This trading session is the best time for trading.
Traders take advantage of price fluctuations between these sessions.
Major Currency Pairs
Some currency pairs in the world are the most popular and have the highest liquidity.
EUR/USD – Euro vs. US Dollar
GBP/USD – British Pound vs. US Dollar
USD/JPY – US Dollar vs. Japanese Yen
USD/CHF – US Dollar vs. Swiss Franc
AUD/USD – Australian Dollar vs. US Dollar
USD/CAD – US Dollar vs. Canadian Dollar
These pairs are called “Majors” because they have the highest liquidity.
How to Make Money in Forex Trading?
Profits in Forex trading are made from the price difference between currencies. If you believe the price is going up, you can make a profit by going long.
For example:
If you bought a euro at 1 EUR = 1.15 USD and its value later rose to 1 EUR = 1.30 USD,
then you made a profit of 0.15 USD per euro.
Leverage is often used in trading, which allows larger trades to be made with less capital—
but this also increases risk.
Major Institutions Involved in the Forex Market
- Commercial Banks
- Central Banks
- Investment Funds
- Hedge Funds
- Retail Traders
Advantages of Forex Trading
- The largest and most liquid market—it operates 24 hours a day, so you can trade anywhere, anytime.
- Starting with a small capital—even small investors can participate, as you can trade mini and micro lots.
- 24×5 Availability—Trading is available day and night.
- Advantages of leverage: Large trades are possible with small amounts. However, you should use leverage appropriate to your risk appetite.
- Opportunities for learning and analysis: Increases technical and economic knowledge.
Risks of Forex Trading
Leverage Loss: Borrowing can increase losses because it offers unlimited leverage.
Market Volatility: Prices can change suddenly due to the impact of global markets.
Lack of Regulation: Lack of regulation in many countries increases the risk of fraud.
Emotional Trading: Trading without a strategy is risky.
4X Trading Guide for Beginners
- Start with a Demo Account.
- Choose the right broker – a licensed and trusted platform.
- Create a Risk Management Plan.
- Learn Technical and Fundamental Analysis.
- Start with small trades and gradually increase.
The Future of Forex Trading
The Forex market is constantly expanding due to the rapidly growing digital economy and mobile trading platforms.
Technologies such as Artificial Intelligence and Algorithmic Trading are making this market smarter and more transparent.
Conclusion
Forex trading is a global market and an investment field full of potential, but it can only be profitable if you approach it with discipline and risk management, while keeping your risk under control.
Note: Don’t try to become rich overnight in trading; try to grow your trading account slowly.