Learn Forex

What is Forex?

The foreign exchange market, which is usually known as "forex" or "FX," is the largest financial market in the world.

It's the global financial market that allows one to trade currencies. Unlike other financial markets, the forex market has no physical location or central exchange. Instead, it operates 24 hours a day through a global network of banks, corporations, and individuals.

With an average daily volume of about USD 6.6 trillion, the forex market offers unparalleled liquidity and opportunities for traders.

Forex Market

Forex vs Stock Market

Trading Hours

Forex Market

The forex market is a seamless 24-hour market with no single central location as participants are spread across the globe.

Stock Market

In India, the stock market timings are 9:00 to 3:30. Besides, the markets are closed on weekends and public holidays.

Liquidity

Forex Market

The forex market has an average daily volume of about USD 6.6 trillion, making it the most liquid financial market in the world.

Stock Market

While stock markets can be liquid, they typically have lower trading volumes compared to the forex market.

Leverage

Forex Market

Brokers in the forex market can offer leverage up to 500:1 or even more, depending on the region.

Stock Market

In the stock market, the typical leverage a trader can use is around 2:1.

What You Trade

Forex Market

Forex is a marketplace for the buying and selling of currencies.

Stock Market

The stock market deals in shares – the units of ownership in a company.

How Forex Trading Works

How Forex Trading Works

In the forex market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple.

The mechanics of a trade are very similar to those found in other financial markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.

When you trade forex, you're simultaneously buying one currency and selling another. This is done in currency pairs, such as EUR/USD or GBP/JPY.

If you believe the value of a currency will rise against another, you buy the pair (go long). If you believe it will fall, you sell the pair (go short).

Understanding Currency Pairs

What is a Currency Pair?

A currency pair consists of two currencies. In the case of forex transactions, one currency will be sold while the other will be bought and vice versa.

Base and Quote Currency

In Forex trading, it takes 2 currencies to form a pair, and there are 2 parts to the 'currency equation':

  • Base currency – the currency in the first part
  • Quote currency – the currency in the second such as GBP/USD or USD/JPY.

Categories of Currency Pairs

The major currency pairs always include the U.S. dollar. These are the most heavily traded pairs and include EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

Cross-currency pairs do NOT include the U.S. dollar. Crosses that involve any of the major currencies are also known as "minors". Examples include EUR/GBP, EUR/JPY, and GBP/JPY.

Exotic currency pairs consist of one major currency and one currency from an emerging market (EM). Examples include USD/TRY, USD/ZAR, and EUR/TRY.

Understanding Spreads and Pips

What is a Spread?

Forex brokers will quote you two different prices for a currency pair: the bid and ask price.

  • The "bid" is the price at which you can SELL the base currency
  • The "ask" is the price at which you can BUY the base currency

The difference between these two prices is known as the spread (Brokerage).

Example:

An example of a 2 pip spread for EUR/USD would be 1.1051/1.1053.

SPREAD = 1.1053 - 1.1051 = 2 pips

What is a Pip?

A pip is usually the last decimal place of a price quote.

  • Most pairs go out to 4 decimal places, but there are some exceptions like Japanese yen pairs (they go out to two decimal places).
  • For example, for EUR/USD, it is 0.0001, and for USD/JPY, it is 0.01.

On trading platforms, the digit representing a tenth of a pip usually appears to the right of the two larger digits.

Example:

If EUR/USD moves from 1.1051 to 1.1052, that is a one pip movement.

How to Start Trading in Forex

  1. Find a Regulated Broker

    Choose a reputable and regulated forex broker like SS Empire to ensure your funds are safe and you get fair trading conditions.

  2. Register

    Complete the registration process with your chosen broker by providing the necessary information and documents.

  3. Open a Demo and Real Account

    Start with a demo account to practice trading without risking real money. Once comfortable, open a real account.

  4. Get Proper Training

    Make sure you get proper training of forex to understand market dynamics, trading strategies, and risk management.

  5. Check Broker Conditions

    Check Average Spread, Commission, Swap charge of the broker to ensure they align with your trading style.

Ready to Start Your Forex Trading Journey?

Join SS Empire's comprehensive forex education program and learn to trade like the pros