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What is forex?

By Saad El Soussi, UAE-authorized finfluencer · Updated 2026-11-08

Forex (foreign exchange) is the global market where one currency is exchanged for another. Traders buy one currency and sell another at the same time, in pairs like EUR/USD, and make or lose money as the exchange rate moves. It is the largest market in the world, with $9.6 trillion traded every day, open around the clock from Sunday evening to Friday evening New York time. Most retail traders use leverage, which multiplies both gains and losses, and most lose money.

The biggest market in the world

According to the BIS Triennial Survey, trading in foreign exchange markets reached $9.6 trillion per day in April 2025, 28% more than the $7.5 trillion a day measured in 2022. The US dollar was on one side of 89.2% of all trades. Spot trades, the straight exchange of one currency for another that retail traders know, were about $3 trillion a day (31% of the total); the rest is swaps, forwards and options used by banks and companies to manage currency risk.

For you that means two things: no single participant can push a major currency around for long, and there is almost always someone on the other side of your trade, so you can get in and out in seconds.

How to read a currency pair

Currencies are always quoted in pairs. EUR/USD 1.0850 means one euro costs 1.0850 US dollars. The first currency (EUR) is the base, the second (USD) is the quote. If you buy EUR/USD you expect the euro to rise against the dollar; if you sell, you expect the opposite.

Pair	What the price means	Notes
EUR/USD	Dollars per euro	The most traded pair in the world
USD/JPY	Yen per dollar	Pips are counted in 0.01 here
GBP/USD	Dollars per pound	Often moves more than EUR/USD
AUD/USD	Dollars per Australian dollar	Sensitive to commodity prices and China
XAU/USD	Dollars per troy ounce of gold	Gold is traded on the same platforms; see the live gold price

Pips, lots and what a move is worth

A pip is the usual smallest price step: 0.0001 for most pairs (0.01 for yen pairs). From 1.0850 to 1.0900 is 50 pips.
A lot is the trade size. A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. Your broker's contract specification has the exact figures.
Pip value: with one standard lot of EUR/USD, one pip is 100,000 × 0.0001 = $10. With a mini lot $1, with a micro lot $0.10.

Worked example: you buy one mini lot of EUR/USD (10,000 euros) at 1.0850 and sell at 1.0900. That is 50 pips × $1 = $50 profit before costs. Had the price fallen to 1.0800 instead, you would have lost $50. Use the lot size calculator to turn a stop loss into the right position size.

Leverage and margin

Leverage lets you control a position much larger than your deposit: the broker locks a fraction of the trade's value as margin. One standard lot of EUR/USD is 100,000 euros; at 30:1 leverage you need 100,000 ÷ 30 = 3,333 euros of margin to open it. A 50-pip move against you then costs $500, a large part of that margin, and 50-pip days are normal. Leverage decides how big you can trade; your stop loss and risk per trade should decide how big you do trade. The margin calculator gives the margin for any pair and leverage.

Regulators cap leverage for retail clients in many places. In the European Union the limits are 30:1 on major currency pairs, 20:1 on other pairs, gold and major indices, 10:1 on other commodities, 5:1 on shares and 2:1 on crypto, with a margin close-out at 50% and negative balance protection, so an account cannot go below zero (ESMA, 27 March 2018). Brokers in other jurisdictions may offer far higher leverage with none of these protections, which is why the regulator of your broker matters.

Most retail traders lose money

When ESMA introduced those limits it noted that 74 to 89% of retail accounts typically lose money trading CFDs. Brokers in the EU now have to print their own percentage in the risk warning; read it before you open an account. The figure is not a reason to avoid learning, but a reason to learn with small positions, a written plan and patience.

What moves exchange rates

Interest rates. When the US Federal Reserve raises rates while the European Central Bank holds, the dollar usually gains against the euro. Expected changes move prices as much as actual ones.
Inflation and economic data. US inflation, jobs and growth figures are the days when EUR/USD and gold move most.
Risk appetite. In a crisis money flows to the dollar, the Swiss franc, the yen and gold.
Trade and politics. Tariffs, elections and geopolitics can move a currency in minutes.
Central bank intervention. Some central banks buy or sell their own currency to steer it; pegged currencies barely move at all.

When the forex market is open

There is no central exchange. The market is considered open from Sunday 5:00 p.m. to Friday 5:00 p.m. New York time, trading in turn through Sydney, Tokyo, London and New York. Activity and price movement are highest when London and New York overlap, roughly 8:00 a.m. to 12:00 noon New York time. Weekends are closed, and prices can gap on Sunday evening after weekend news.

Who trades forex

Banks trading with each other, companies paying suppliers abroad, funds hedging foreign investments, central banks managing reserves, and retail traders through brokers. Retail trading is a small share of the total, which is why one person's order never moves EUR/USD.

Forex vs stocks

	Forex	Stocks
What you trade	One currency against another	A share of a company
Hours	Around the clock, Monday to Friday	Exchange hours
Leverage	Almost always used	Rarely used by retail investors
Income	Only from price moves (plus or minus overnight interest)	Dividends possible
Direction	Equally easy to buy or sell short	Short selling is harder

How to start without burning your fingers

Open a demo account and trade it for at least a month as if the money were real.
Pick one market (EUR/USD or gold) and learn its rhythm before adding others.
Decide your risk per trade in advance (many use 1% of the account) and place the stop loss before you click buy.
Keep a trading journal: date, reason, result. After fifty trades you will see patterns you would otherwise miss.
Check the regulator of any broker before you deposit, and read its loss-percentage warning. Our broker checklist links to the official registers.

If gold is the market you want to learn, continue with how to trade gold. For the whole path in order, from demo account to the first live trade, read trading for beginners; the pip value calculator gives the pip value for any pair.

Learn with SesTrading

We trade gold and publish the results every week in our public Telegram channel, losing trades included. Open our bot to ask questions and see how it works. It answers in English.

Open the SesTrading botOn Telegram

Questions people ask

Is forex trading legal?

In most countries, yes, through a broker licensed by the local regulator. Check the broker on the regulator's website before you deposit. SesTrading does not serve residents of the United Kingdom.

Can I lose more than I deposit?

With a broker under EU rules, no: negative balance protection is required for retail clients. With brokers elsewhere it can happen. You can always lose the whole deposit.

What is a pip?

The usual smallest price step in a currency pair: 0.0001 for most pairs and 0.01 for yen pairs. From 1.0850 to 1.0860 is 10 pips.

Is forex the same as CFD trading?

Most retail forex trading is done through CFDs or similar contracts: you trade the price difference without ever owning the currency. Banks and companies exchange the actual currencies.

How is forex different from gold trading?

Gold (XAU/USD) is quoted and traded like a currency pair on the same platforms, but it reacts most to US interest rates, the dollar and fear in the markets, and it moves more in dollar terms. See how to trade gold.

Authorized in the UAESaad Nizar El Soussi, founder of SesTrading, is listed by the UAE Capital Market Authority as an authorized finfluencer (entry 193, added 24 September 2026). Check the official list.