What is the forex market?
Foreign exchange is the largest market in the world and the one with the least visible machinery. There is no building, no closing bell, and no single price — which explains most of what confuses newcomers.
Forex is the exchange of one currency for another. Every import, every holiday, every cross-border investment passes through it. Speculation sits on top of that real flow, and by volume it dwarfs it.
There is no exchange
Shares trade on an exchange: one order book, one official price, fixed hours. Currencies do not. Forex is over the counter — a network of banks, brokers and funds quoting each other directly.
The consequence matters in practice. There is no single official price for EURUSD at any instant; there is the price your counterparty will give you. Two brokers can show different quotes simultaneously and both be honest.
The sessions
The market runs continuously from Sunday evening to Friday evening, but activity is not spread evenly across it.
| Session | Roughly (UTC) | Character |
|---|---|---|
| Sydney / Tokyo | 22:00 – 08:00 | Quietest. Narrow ranges, AUD/NZD/JPY pairs most active |
| London | 07:00 – 16:00 | The largest share of volume. Ranges expand sharply at the open |
| London + New York | 12:00 – 16:00 | The overlap. Widest ranges, tightest spreads |
| New York alone | 16:00 – 21:00 | Winds down through the afternoon |
A strategy that works in the overlap can lose money in the Asian session without a single line of it being wrong. It was designed for a different amount of movement.
Reading a quote
EURUSD = 1.0850 means one euro costs 1.0850 dollars. The first currency is what you are buying or selling; the second is what you pay in.
- Bid — where you can sell. Ask — where you can buy. Ask is always higher; the gap is the spread.
- Pip — the fourth decimal on most pairs, the second on yen pairs. Most brokers quote a fifth decimal, a fraction of a pip.
- Lot — 100,000 units of the base currency. A mini lot is 10,000, a micro lot 1,000.
Leverage, stated honestly
Leverage lets you control a position much larger than your deposit. At 1:100, a thousand dollars controls one standard lot, where each pip is worth about ten dollars.
This is usually explained as an opportunity. It is more useful to understand it as a multiplier on speed: at that size a hundred-pip move — an ordinary day on EURUSD — is your entire account.
Leverage does not change your expected outcome. It changes how fast you arrive at it, and whether you survive the path. Most accounts are lost to position size, not to bad analysis.
Who is actually on the other side
- Banks, quoting each other and serving corporate clients. The bulk of real volume.
- Corporations, hedging genuine exposure — an exporter paid in dollars with costs in euros.
- Funds and central banks, positioning or managing reserves.
- Retail traders, a small fraction of turnover, reached through brokers.
Retail orders often do not reach the interbank market at all. Many brokers internalise flow, matching clients against each other or holding the other side themselves. That is legal and disclosed, but it is worth knowing which model your broker runs.
What it takes to start
A terminal, a broker account, and the discipline to size positions so that being wrong is survivable. The first two take an afternoon.
Trading currencies on leverage carries a real risk of losing more than you planned to. Most retail accounts lose money. Anyone telling you otherwise is selling something.