Forex: Facts You Need to Know Before Starting Trading

When you travel and need to exchange your money, or when you buy a product from abroad with a different currency, you are actually participating in the world’s largest financial market - the Forex Market. This massive market experiences daily movements exceeding $9.6 trillion (according to April 2025 statistics), making it many times larger than all global stock markets combined.

But forex is not just an ordinary currency exchange - it’s a arena for investors and traders seeking to profit from continuous price fluctuations. The real question: Is this market suitable for you? And how can you get started?

How It Works: How Does the Market Actually Move?

Unlike stock markets, there is no central headquarters for forex. Instead, the market operates through a global network of banks and institutions communicating electronically - known as OTC (Over-The-Counter).

All trading is done through currency pairs. When you see EUR/USD, for example, you are comparing the strength of the euro against the dollar. If you predict the euro will strengthen, you buy the pair. If you expect it to weaken, you sell. That’s it, simply.

The market operates 24 hours a day, 5 days a week, because trading sessions follow each other worldwide - from Sydney, then Tokyo, London, and finally New York. There is no real halt to the market.

Types of Pairs: Not All Are Equal

You might think all currency pairs are the same, but there’s a big difference:

Major Pairs (Majors): EUR/USD, USD/JPY, GBP/USD, and others. These pairs are the most liquid and safest for beginners, because spreads are tight and movements are smooth.

Minor Pairs (Minors): EUR/GBP or GBP/JPY, for example. Less liquidity, but offer additional opportunities, with slightly higher costs.

Exotic Pairs (Exotics): USD/MXN or USD/THB. These are for professionals only - high volatility, wide spreads, and significant risks.

Terms You Need to Understand

Spread: The difference between the bid and ask price. Example: if prices are 1.1050 and 1.1048, the spread = 2 pips. The smaller, the better.

Pip: The smallest price movement unit. Usually the fourth decimal place. Movement from 1.1000 to 1.1001 = 1 pip.

Leverage: A double-edged sword. With $100 and 1:100 leverage, you trade with $10,000. Profits multiply… and losses too.

Margin: The amount required to keep a position open. If it drops below a certain level, your account is automatically closed.

Factors Moving Prices

Forex doesn’t move randomly. There are clear drivers:

• Central Bank Decisions: Raising interest rates makes a currency stronger, lowering weakens it.
• Economic Data: Strong growth and low inflation = strong currency.
• Geopolitical Events: Wars or political crises drive people to safe havens (usually the dollar and yen).
• Government Decisions: In 1985, five countries agreed to weaken the dollar - and it actually happened.

Trading Styles: Which Approach Suits You?

Short-term Trading: Seconds, minutes, or hours. Requires high focus, continuous monitoring, and nerves of steel. Small but frequent profits.

Swing Trading (Medium-term): Days or weeks. A good balance between flexibility and profit. Needs a solid understanding of trends.

Long-term Trading: Months or years. Focuses on major trends and fundamental economic factors. Less psychological stress.

Basic Technical Indicators

Don’t make decisions based solely on intuition. Use:

• Moving Averages: See the overall trend and ignore daily noise.
• RSI (Relative Strength Index): Tells you if the price is overbought or oversold.
• MACD: Confirms trend and warns of reversals.
• Support and Resistance Levels: Price “boundaries” where the market tends to pause.

The Real Advantages of Forex

✅ Trading 24/5: Suitable for employees and those with flexible schedules.

✅ Low Capital Requirement: Start with just $100 thanks to leverage.

✅ Huge Liquidity: Execute trades in seconds without affecting the price.

✅ Tight Spreads: Profits are not eaten up by high commissions.

✅ Daily Opportunities: The market is constantly volatile - profit opportunities every hour.

Risks That Cannot Be Ignored

❌ Total Capital Loss: Very possible, especially for beginners.

❌ Leverage as a Double-Edged Sword: Amplifies losses rapidly.

❌ Sharp Volatility: One new event can turn the market within minutes.

❌ Psychological Pressure: Monitoring funds 24/7 is real stress.

❌ Complexity: Technical and fundamental analysis require time to learn.

Your First Steps to Get Started

1. Learn the Basics: Don’t open an account before you truly understand the market.

2. Open a Demo Account: Practice trading with virtual capital. No downsides - your only goal is learning.

3. Make a Plan: Decide which pairs to trade, risk percentage (1-2% of your capital), and your strategy.

4. Start Very Small: First real account? Invest an amount you can easily lose. Building confidence gradually is more important than quick profits.

5. Use Stop-Loss Orders: Always. Avoid catastrophic losses.

6. Follow Economic Data: Interest rate news and economic reports strongly influence forex.

7. Don’t Trade with Emotions: Lost a trade? Don’t try to “make up” with reckless moves. Discipline will save you.

Summary

Forex is not a buried treasure or an easy path to wealth. It’s a real, complex market full of opportunities and risks. Success requires:

• Continuous Learning: The market evolves, and currencies move based on new factors.
• Strict Risk Management: Never risk your entire capital on one trade.
• Patience and Discipline: The best trader is the one who controls their emotions.
• Practical Experience: Theoretical learning alone is not enough.

If you’re willing to spend time learning, capable of handling losses, and disciplined in executing your strategies, you can achieve good results in forex trading. But remember: this is a high-risk investment, not a gambling game.