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Lesson 1: What is Forex Trading?

So, what is Forex trading? Well it is quite simple. It means exchanging one currency for another. That’s it!

The Forex market is the largest financial market in the world! Forex or FX means foreign exchange.

Currencies are traded in pairs. Remember when you went overseas and bought Pound Sterling with your South African Rand at the airport? You traded Forex by exchanging Rands for Pound and GBP/ZAR was the currency pair.

After your holiday was over and you waved goodbye to Big Ben, you returned home. Now you had to change the remaining Pounds in your wallet back to Rand. You notice the exchange rate is different to when you left. Why is this? This change in price could have been caused by inflation, economic changes, the balance between supply and demand or other factors.

Exchange rates change all the time. When trading Forex it is important to buy at a low price and sell high or buy high and sell low. By trading currency pairs, you can profit from the rise in value of one currency against the fall in value of another one.

Who Trades the Forex Market?

The Forex market is huge and is made up of banks, businesses, governments, investors and traders like you and me. Nearly $4 trillion in currency is traded daily on the Forex market.

The forex market is extremely competitive but not utter chaos as you might think. Below you can see how the institutions fit together to make it the largest financial market in the world.

Final Note:

By completing this Forex trading course, you will also learn techniques we use to analyse the market. With careful analysis we can fairly safely predict which way the market will move. Should we buy or sell? Is the price going up or down?

In our next lesson, you will learn the Advantages of Forex Trading.