What is Forex Trading?

What is Forex trading? I'm glad you asked. Trading in the Forex market is one of the most exciting and potentially profitable activities you could engage in. If you've heard about the Forex market at some point and asked yourself, "What is that?" then this is the place for you.

Forex Market

The Forex market is definitely the largest financial market in the world. On a daily basis, somewhere over $4 trillion changes hands. By comparison, this dwarfs the stock market, the bond market, the commodities market and even your local supermarket.

what is forex trading

In this market, people are constantly trading one currency against another. In the past, the exchange rate of two currencies used to be set to the value of gold and then the value of the dollar. Now, exchange rates fluctuate based on economic factors. Every day, the exchange rates between currencies move back and forth.

The objective in the Forex market is to try to get guess which currency is going to increase in value as compared to another currency. You get involved hoping that the exchange rate moves in your favor while you hold the currency.

How it Works

To participate in the Forex market, you will need to open an account with one of the many Forex brokers available. Your broker allows you to buy and sell currencies. Currencies are grouped together into currency pairs. Forex currency pairs are traded at all times, 24 hours per day, 5 days per week.

When you get into a trade, you are always simultaneously buying one currency and the pair and selling the other currency. For example, when you buy the EUR/USD pair, you are buying Euros and selling Dollars all at the same time. Look at you, you little multi-tasker you!

After you buy the EUR/USD pair, you hope that the value of the euro increases as compared to the value of the dollar. If it does, you can close out the trade and put some cash in your pocket. If the opposite occurs, then when you close your trade out, you will lose money.


Getting involved in this market can be exciting (would you expect a site like Forex Trading Rookie to say anything else?) and it can provide you with a number of benefits as an investor. For example, when you trade in this market, you get to trade with very large amounts of leverage. What is Forex trading if you don't get to trade with a lot of leverage? Boring and not very profitable.

When you trade in the United States, you can trade with a maximum of 50:1 leverage. By comparison, when you trade in the stock market, you might be able to trade with 2:1 leverage. This allows you to profit from very small movements in the Forex market.

Another advantage of trading as market is that it is open to much all the time. If you work a full-time job, this can make it possible for you to trade around your schedule. If you are home in the evenings, feel free to open up your trading platform on your computer and start trading. In the stock market, it is harder to get involved when you work a full-time job, because you're working while the market is open. Although the stock market does have after-hours trading, it is not quite the same.

Rollin' the Dice

Even though this market can be fun and very profitable, it is no walk in the park. You're not going to be able to read this article and then go out and make $1 million by tomorrow. Unless you have a $1 million to invest and you get lucky. But if you had that much to invest, you probably would not be reading this right now, so I think we're safe.

This is a risky market and you have to be prepared to lose everything in your account. This is not the time to bet the mortgage payment or your kid's college fund. This is a market that you get involved with only if you have the cash to blow. What is Forex trading? An opportunity to make money from fluctuations in the exchange rates between currencies. It is not the lottery or your personal ATM.

What Are You Waiting On?

You see the heading of this section....what are you waiting on? If you're ready to find out more, click on one of the links below or on the side of the page and find out more about the market and how to start making money. If not...well, hey, we had a good run. Back to your PS3 or Pinterest collection. If you are still wondering "What is Forex trading?" then read on.

Return From What is Forex Trading to Definition of Foreign Exchange

Return From What is Forex Trading to Forex Trading

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