1. Introduction: What is Forex Trading?

Forex (foreign exchange) trading is the global marketplace where currencies are bought and sold. It operates 24/5 and has a daily trading volume exceeding $7 trillion, making it the world’s largest financial market.

2. How Does Forex Trading Work?

Forex trading involves exchanging one currency for another in currency pairs (e.g., EUR/USD, GBP/JPY).

The first currency (base) is what you buy or sell, while the second (quote) represents its price.

Prices fluctuate based on supply, demand, and economic factors.

3. Major, Minor & Exotic Pairs

Major Pairs: Most traded and stable (e.g., EUR/USD, USD/JPY).

Minor Pairs: Less liquidity, higher volatility (e.g., EUR/GBP, AUD/NZD).

Exotic Pairs: Involve emerging market currencies (e.g., USD/TRY, GBP/ZAR).

4. Forex Market Sessions

Sydney Session (10 PM – 7 AM GMT) – Lower volatility.

Tokyo Session (12 AM – 9 AM GMT) – Active for JPY & Asian currencies.

London Session (7 AM – 4 PM GMT) – Most liquid market session.

New York Session (12 PM – 9 PM GMT) – Highly volatile, overlaps with London.

5. How to Read Forex Prices (Bid & Ask Price)

Bid Price: The price at which traders sell a currency.

Ask Price: The price at which traders buy a currency.

The spread (difference between bid and ask) is how brokers make money.

6. Forex Trading Styles

Scalping: Short-term trades (seconds/minutes).

Day Trading: Positions closed within a day.

Swing Trading: Holding trades for days or weeks.

Position Trading: Long-term trades based on fundamentals.

7. Risk Management in Forex

Use a stop-loss to limit potential losses.

Maintain a risk-to-reward ratio (e.g., 1:2 or 1:3).

Risk only 1-2% of your capital per trade.

Forex trading offers opportunities but comes with risks. Understanding the basics of currency pairs, market sessions, trading styles, and risk management is crucial before placing trades.

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