The World's Largest Financial Market
The foreign exchange market — or forex — is where currencies are bought and sold. With over $7.5 trillion traded daily, it is the largest and most liquid financial market on Earth, operating 24 hours a day, five days a week across every major global timezone.
Unlike stock exchanges, forex has no central marketplace. Instead, it operates through an interbank network — a global web of banks, institutional traders, and retail brokers connected electronically. This decentralised structure means trading is always available somewhere in the world.
How Currency Pairs Work
Forex is always traded in pairs. When you trade EUR/USD, you are simultaneously buying Euros and selling US Dollars (or vice versa). The first currency in the pair is the base currency; the second is the quote currency.
The price shown — for example, 1.0850 — tells you how many units of the quote currency you need to buy one unit of the base currency. If EUR/USD is 1.0850, one Euro costs 1.0850 US Dollars.
Major pairs — those involving the US Dollar — are the most liquid and include:
- EUR/USD (Euro / US Dollar)
- GBP/USD (British Pound / US Dollar)
- USD/JPY (US Dollar / Japanese Yen)
- USD/CHF (US Dollar / Swiss Franc)
What Moves Currency Prices?
Currency prices are constantly moving in response to:
Economic data: GDP growth, employment figures, inflation reports, and retail sales all influence a currency's perceived strength. Stronger economic data typically strengthens a currency.
Interest rates: Central banks set interest rates that determine borrowing costs. Higher interest rates attract foreign capital (seeking better returns), which increases demand for that currency.
Political events: Elections, trade agreements, geopolitical tensions, and government policy changes create uncertainty that can cause sharp currency moves.
Market sentiment: When traders collectively move toward safe-haven currencies (like USD, CHF, JPY) during times of global uncertainty, this creates momentum regardless of underlying fundamentals.
How Retail Traders Participate
Individual traders access the forex market through a regulated broker like eplanet Brokers. The broker provides:
- A trading platform (MetaTrader 5 or cTrader) to place and manage trades
- Pricing — bid/ask spreads on currency pairs
- Leverage — the ability to control a larger position with a smaller deposit
- Execution — filling your orders in the interbank market
Understanding Pips and Lots
A pip (percentage in point) is the smallest standard price move for most currency pairs — the fourth decimal place. If EUR/USD moves from 1.0850 to 1.0851, that is a one-pip move.
A standard lot is 100,000 units of the base currency. Most retail traders use mini lots (10,000 units) or micro lots (1,000 units) to manage risk appropriately.
With a standard lot on EUR/USD, each pip is worth approximately $10. With a mini lot, each pip is worth approximately $1.
The Role of Leverage
Leverage allows you to control a larger position than your deposit would normally allow. With 100:1 leverage, a $1,000 deposit can control $100,000 in currency.
This amplifies both profits and losses. A 1% favourable move on a standard lot generates $1,000 profit — but a 1% adverse move generates a $1,000 loss. Understanding and managing leverage is one of the most critical skills in trading.
Getting Started
1. Learn the fundamentals — read our education guides, understand how markets work 2. Open a demo account — practice with virtual funds before risking real capital 3. Develop a strategy — define your entry, exit, and risk management rules 4. Start small — use a micro or mini account when you begin live trading 5. Keep a trading journal — record every trade and review your decisions regularly
Trading forex successfully requires discipline, continuous learning, and strict risk management. eplanet Brokers provides the tools and resources to support you at every stage of your trading journey.