What is forex?
Forex — short for foreign exchange, and often abbreviated to FX — is the global market in which currencies are exchanged. Every forex transaction is two transactions at once: you buy one currency while simultaneously selling another.
Currency exchange underpins virtually all international economic activity. A German manufacturer paying a Japanese supplier, a pension fund buying US Treasuries, a family remitting savings abroad and a traveller buying dollars at an airport are all, in effect, forex participants. Speculative trading — taking a view on whether one currency will strengthen or weaken against another — is only one part of a market that exists first and foremost to make global trade and investment possible.
Because currencies are always valued relative to each other, they are quoted in pairs. If you believe the euro will strengthen against the US dollar, you would buy EUR/USD; if you believe it will weaken, you would sell it. Your result depends entirely on how the exchange rate moves between the moment you open and the moment you close the position.
Truly global
Participants in more than 190 countries, 180+ currencies in circulation and over 160 central banks shaping monetary policy.
Around the clock
Trading passes from Sydney to Tokyo to London to New York, 24 hours a day, five days a week.
Deeply liquid
The largest financial market on earth, with major pairs quoted continuously by the world's leading banks.
How big is the forex market?
Every three years, the Bank for International Settlements (BIS) — the bank for the world's central banks — coordinates a survey of FX dealers across dozens of jurisdictions. It is the most authoritative measure of the market's size. The April 2025 survey found that global over-the-counter FX turnover averaged US$9.6 trillion per day, up 28% from US$7.5 trillion in April 2022.
| Instrument | Daily turnover | Share of total |
|---|---|---|
| FX swaps | US$4.0tn | 42% |
| Spot | US$3.0tn | 31% |
| Outright forwards | US$1.8tn | 19% |
| FX options | — | ≈7% |
| Currency swaps | — | ≈2% |
Spot trading — the immediate exchange of one currency for another, and the segment most relevant to active traders — rose to 31% of the total. The US dollar remained dominant, sitting on one side of 89.2% of all trades, and all ten of the most traded currency pairs involved the dollar.
Currency shares of global turnover
Because every trade involves two currencies, individual shares add up to 200%.
| Currency | April 2025 | April 2022 |
|---|---|---|
| US dollar (USD) | 89.2% | 88.4% |
| Euro (EUR) | 28.9% | 30.6% |
| Japanese yen (JPY) | 16.8% | 16.8% |
| Pound sterling (GBP) | 10.2% | 12.9% |
| Chinese renminbi (CNY) | 8.5% | — |
| Swiss franc (CHF) | 6.4% | — |
Trading is concentrated in a handful of financial centres. The United Kingdom remained the world's leading FX hub with roughly 38% of sales-desk turnover, followed by the United States (about 19%), Singapore (11.8%) and Hong Kong SAR (7.0%).
Source: Bank for International Settlements, Triennial Central Bank Survey — OTC foreign exchange turnover in April 2025. Figures are net-net or net-gross as reported by the BIS and may be revised.
How the market is structured
Unlike equities, forex has no central exchange. It is a decentralised, over-the-counter (OTC) network of institutions trading directly or through electronic venues. Liquidity flows through a hierarchy: prices formed among the largest banks cascade outward, and each tier adds access, anonymity or convenience for the tier below.
Central banks
Set monetary policy and interest rates, manage reserves and may intervene to stabilise their currency.
Interbank market
The core of liquidity, where the largest global banks trade with one another in enormous size.
ECNs
Electronic networks connecting participants anonymously, aggregating quotes and tightening spreads.
Liquidity providers
Major banks and non-bank market makers streaming two-way bid/ask prices into the market.
Brokers
Provide retail and professional access, either passing orders to liquidity (ECN/STP) or making markets.
Traders
Individuals and institutions trading to speculate on price moves or to hedge real currency exposure.
The practical consequence for a trader is that price quality depends on how close your access sits to the core of this chain. Tighter spreads, faster execution and less slippage generally come from deeper, better-aggregated liquidity — one reason execution quality is a central concern for any professional desk.
Who trades forex — and why
According to the BIS, trading between reporting dealers accounted for about 46% of 2025 turnover, while other financial institutions — smaller banks, asset managers, hedge funds, proprietary trading firms and others — accounted for roughly half. Non-financial corporations made up around 5%. Each participant brings a different motive, and those motives together determine how prices behave.
Central banks
Pursue price stability and financial stability. Their interest-rate decisions and occasional interventions are among the most powerful forces in the market.
Commercial & investment banks
Make markets for clients, manage their own balance-sheet exposure and supply the bulk of interbank liquidity.
Corporations
Convert revenues and pay suppliers across borders, and hedge future currency flows to protect margins.
Asset managers & hedge funds
Hedge international portfolios, and run active currency strategies based on macro views, rate differentials or systematic models.
Retail traders
Individuals accessing the market through brokers and platforms, typically trading spot FX or CFDs with leverage.
Professional managers
Desks such as OT PMC that trade on behalf of clients under a written mandate, with defined objectives and risk limits.
Understanding currency pairs
Every pair has a base currency (first) and a quote currency (second). The price tells you how many units of the quote currency one unit of the base currency is worth. If EUR/USD is 1.0850, one euro buys 1.0850 US dollars. When you buy the pair, you are buying euros and selling dollars; when you sell it, you do the reverse.
The most liquid
The US dollar paired with another major currency: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, NZD/USD. Typically the tightest spreads.
Without the dollar
Two major currencies traded directly, such as EUR/GBP, EUR/JPY, GBP/JPY or AUD/NZD. Liquid, but spreads are usually a little wider.
Emerging markets
A major against an emerging-market currency, such as USD/TRY or USD/ZAR. Wider spreads, higher volatility and greater event risk.
The eight major currencies
Precious metals are also widely traded against currencies. XAU/USD is the price of one troy ounce of gold in US dollars; XAG/USD is silver. Gold in particular is watched as a barometer of real interest rates, the dollar and global risk appetite.
How to read a forex quote
A forex quote always has two prices. The bid is the price at which you can sell the base currency; the ask (or offer) is the price at which you can buy it. The ask is always higher than the bid, and the difference between them — the spread — is the principal cost of trading.
EUR/USD
Illustrative quoteThe large digits are the pips; the small final digit is a fractional pip (a "pipette"). Spreads widen when liquidity is thin — around major news releases, at the daily rollover and outside the main sessions.
Because you buy at the ask and sell at the bid, every new position starts marginally negative by the amount of the spread. Over hundreds of trades this cost compounds, which is why spread, commission and execution quality matter as much as the trading idea itself.
Live EUR/USD chart provided by TradingView. For information only; not a recommendation to trade.
Pips, lots and calculating profit or loss
A pip ("percentage in point") is the standard unit of price movement. For most pairs it is the fourth decimal place, 0.0001; for yen pairs it is the second, 0.01. A move in EUR/USD from 1.0850 to 1.0875 is a 25-pip move.
A lot is the size of the trade, measured in units of the base currency. For any pair where the US dollar is the quote currency, the value of one pip is simple to calculate: trade size × 0.0001.
| Lot type | Units of base currency | Pip value (EUR/USD) |
|---|---|---|
| Standard · 1.00 | 100,000 | US$10.00 |
| Mini · 0.10 | 10,000 | US$1.00 |
| Micro · 0.01 | 1,000 | US$0.10 |
When the dollar is the base currency, the pip value must be converted. For USD/JPY, one pip on a standard lot is 100,000 × 0.01 = ¥1,000, which at a rate of 150.00 is worth about US$6.67.
A worked EUR/USD trade
Figures are hypothetical, for education onlyIf the trade works
- Direction
- Buy EUR/USD
- Size
- 0.50 lot (50,000)
- Entry (ask)
- 1.08500
- Exit (bid)
- 1.08900
- Movement
- +40 pips
- Pip value
- US$5.00
- Gross result
- +US$200.00
If the stop is hit
- Direction
- Buy EUR/USD
- Size
- 0.50 lot (50,000)
- Entry (ask)
- 1.08500
- Stop-loss (bid)
- 1.08300
- Movement
- −20 pips
- Pip value
- US$5.00
- Gross result
- −US$100.00
Formula: profit/loss = pips moved × pip value × lots. Here the planned risk:reward is 1:2 (20 pips risked for 40 targeted). Results exclude spread, commission and overnight swap, which reduce net returns. Real outcomes vary and slippage can cause a loss larger than planned.
Leverage and margin
Leverage allows you to control a position far larger than the capital you commit. Margin is the deposit your broker holds as collateral for that position. With leverage of 1:30, for example, a US$30,000 position requires US$1,000 of margin. Leverage limits vary by jurisdiction and client classification; many regulators cap retail leverage on major pairs at around 1:30.
The critical point is that leverage does not change the size of the market move — it changes the size of the consequence. Losses are calculated on the full position, not on the margin.
| Leverage used | Position per US$1,000 margin | 1% move against you | Loss as % of margin |
|---|---|---|---|
| 1:1 | US$1,000 | −US$10 | −1% |
| 1:10 | US$10,000 | −US$100 | −10% |
| 1:30 | US$30,000 | −US$300 | −30% |
| 1:100 | US$100,000 | −US$1,000 | −100% |
Professional desks think in terms of effective leverage — total open exposure divided by account equity — rather than the maximum leverage a broker permits. Keeping effective leverage low is one of the simplest and most powerful risk controls available.
Forex trading sessions
The forex week opens on Sunday evening (UTC) as Sydney comes online, and closes on Friday evening as New York winds down. Liquidity follows the sun through four main sessions. The clocks and session map below update live in your browser.
Global trading sessions
Loading…| Session | Approx. hours (UTC) | Character |
|---|---|---|
| Sydney | 21:00 – 06:00 | Opens the week; AUD and NZD most active; typically quieter. |
| Tokyo | 00:00 – 09:00 | Asian liquidity; JPY, AUD and regional flows lead. |
| London | 07:00 – 16:00 | The world's largest FX centre; EUR, GBP and CHF most active. |
| New York | 12:00 – 21:00 | USD data releases and US market flows dominate. |
The London–New York overlap (roughly 12:00–16:00 UTC) is usually the most liquid and volatile window of the day, and it is when many of the most important US economic releases land. Session times shift by an hour when daylight saving begins or ends in each region.
What moves exchange rates?
A currency's value reflects global demand for the assets and goods denominated in it. That demand shifts constantly in response to a small number of powerful forces.
Interest rates
Higher expected yields tend to attract capital. Changes in rate expectations are often the single largest driver of major pairs.
Inflation
Inflation erodes purchasing power and shapes how aggressively a central bank must tighten or ease policy.
Growth data
GDP, employment, PMIs and retail sales signal economic momentum and future policy direction.
Central bank policy
Rate decisions, forward guidance, balance-sheet policy and, occasionally, direct intervention.
Geopolitics
Elections, conflicts, sanctions and policy shocks can reprice currencies abruptly.
Risk sentiment
In risk-off episodes, capital often flows to perceived safe havens such as the US dollar, Japanese yen, Swiss franc and gold.
Trade & capital flows
Trade balances, commodity prices and cross-border investment create persistent demand for — or supply of — a currency.
News & surprises
Markets price expectations; it is the difference between forecast and actual that moves prices.
The central banks that matter most
Fundamental, technical and sentiment analysis
There are three broad lenses through which traders form a view. Each answers a different question, and professional desks rarely rely on one alone.
Fundamental
Why should a currency move? Studies the economy and policy behind it.
- Rate differentials
- Inflation and growth
- Central bank guidance
- Economic calendar
Technical
When and where to act? Studies price behaviour itself.
- Trend and structure
- Support and resistance
- Moving averages, RSI, MACD
- Volatility (ATR)
Sentiment
How positioned is the market already? Studies crowd behaviour.
- Positioning reports
- Risk-on / risk-off regime
- Options skew
- Crowded trades
Fundamentals suggest the direction, technicals refine the timing, and sentiment warns you when everyone else already agrees.
The lifecycle of a trade
Every disciplined trade follows the same sequence, from the first market signal to the final realised result.
Market drivers
Economic data, news, interest-rate expectations and geopolitical developments create the conditions for a move.
Analysis
Fundamental and technical analysis are combined to form a view on direction, timing and the levels that would invalidate it.
Trading decision
A decision to buy or sell a specific pair, with the entry, stop-loss, target and position size defined in advance.
Order execution
The order is placed through a broker and matched with available liquidity; spread and slippage determine the actual fill.
Trade management
The position is monitored, risk is managed and the trade is adjusted or closed as conditions evolve — according to the plan, not emotion.
Profit or loss realised
The result is booked and, crucially, reviewed. Consistent learning from every outcome is what compounds over time.
Risk management: the professional's edge
Risk exists in every endeavour — a career, a business, farming, investing. The answer is not to avoid risk, but to understand it, size it and control it. In forex, where leverage is readily available, risk management is not one part of the strategy; it is the strategy.
Position sizing
Risk a small, fixed fraction of equity per trade — many professionals use 1–2% or less. On a US$10,000 account, a 1% risk with a 25-pip stop on EUR/USD equals 0.40 lot (US$100 ÷ 25 pips ÷ US$10).
Stop-loss discipline
Define the exit before the entry, place it where the trade idea is proven wrong, and never widen it to avoid taking a loss.
Risk:reward
Seek trades where the potential gain meaningfully exceeds the potential loss — for example 1:2 — so a minority of winners can still carry the book.
Diversification & correlation
Several USD trades are often one trade in disguise. Monitor correlation so exposure is not unknowingly concentrated.
Leverage control
Cap effective leverage well below the maximum available, and reduce it further around major events.
Psychology & discipline
Fear and greed are the most expensive indicators. A written plan, patience and emotional control protect capital more than any signal.
Knowledge
How markets and products work
Understanding
Of risk, and of yourself
Discipline
Following the plan, every time
Success
Knowledge today, freedom tomorrow
Never trade money you cannot afford to lose. Sustainable results come from continuous learning and consistently correct decisions — not from the wish to get rich quickly.
Forex vs stocks
Both are core asset classes, but they behave very differently. Understanding those differences helps you decide which role each should play in a broader portfolio.
| Feature | Forex | Stocks |
|---|---|---|
| Market structure | Decentralised OTC network | Centralised exchanges |
| Trading hours | 24 hours, 5 days a week | Exchange hours, plus limited extended sessions |
| Size & liquidity | US$9.6tn per day (BIS, 2025) | Deep in large caps; thinner in small caps |
| What you trade | Relative value of two currencies | Ownership in a single company |
| Going short | As simple as going long | Requires borrowing stock; may be restricted |
| Typical leverage | Higher; varies by jurisdiction | Lower for cash equities |
| Key drivers | Rates, macro data, central banks | Earnings, sector trends, valuation |
| Income | Swap/carry (can be positive or negative) | Dividends |
| Main risk | Leverage-driven losses, event gaps | Company-specific and market drawdowns |
Trading platforms: MetaTrader 5
MetaTrader 5 (MT5) is one of the most widely used multi-asset trading platforms in the world. It connects you to your broker's pricing and execution and provides a complete professional toolkit across devices.
Live charts
Real-time pricing across 21 timeframes with detailed chart tools.
Order types
Market, limit and stop orders with attached stop-loss and take-profit levels.
Indicators
Built-in technical indicators and analytical objects, plus custom studies.
Automation
Expert Advisors (EAs) to automate rules-based strategies, with a strategy tester.
Desktop & mobile
Windows, macOS, web, iOS and Android — monitor and manage trades anywhere.
Market depth & calendar
Depth of market and an integrated economic calendar and news feed.
A platform is only a tool. The results depend on the process behind each decision — which is why an institutional approach invests as much in research, risk and review as in software.
How OT PMC can help
Understanding forex is the first step. Applying that knowledge consistently — with research, risk controls and the discipline to follow them — is where most individuals struggle. OT PMC offers two routes for those who want professional management rather than trading alone.
Forex Trading Desk
A managed forex account traded by our desk within a signed member agreement and defined risk limits, tracked in real time in your member portal.
Explore the trading deskPortfolio Management
Discretionary portfolio management services built around your objectives, time horizon and risk tolerance, with transparent reporting.
Explore portfolio managementForex glossary
The essential vocabulary of the currency market, from A to V.
The price at which the market will sell the base currency to you — the price you pay when you buy.
The first currency in a pair. A quote shows how much of the quote currency one unit of the base currency buys.
The price at which the market will buy the base currency from you — the price you receive when you sell.
Holding a higher-yielding currency against a lower-yielding one to earn the interest-rate differential, while accepting exchange-rate risk.
The institution that sets a country's monetary policy and interest rates, and may intervene in its currency.
A pair that does not include the US dollar, such as EUR/GBP or AUD/JPY.
The decline in account equity from a peak to a subsequent trough, usually expressed as a percentage.
Electronic Communication Network — a venue that matches orders from many participants anonymously, typically with tighter spreads.
Account balance plus or minus the floating profit or loss on open positions.
Controlling a position larger than the capital committed. It magnifies gains and losses in equal measure.
An instruction to buy or sell at a specified price or better, used to enter at a level or to take profit.
The ease with which a currency can be bought or sold without materially moving its price.
Long means you have bought the base currency expecting it to rise; short means you have sold it expecting it to fall.
The standardised trade size. A standard lot is 100,000 units of the base currency; mini is 10,000; micro is 1,000.
The collateral required to open and hold a leveraged position. It is a deposit, not a fee.
Alerts and automatic closures triggered when equity falls below the level needed to support open positions.
Percentage in point — the standard unit of price movement, usually the fourth decimal place (0.0001), or the second for yen pairs (0.01).
The second currency in a pair; the currency in which the price and profit or loss are expressed.
The potential loss on a trade (to the stop) compared with its potential gain (to the target).
The difference between the requested price and the executed price, common around news or in thin markets.
The difference between the bid and the ask — the core transaction cost of a trade.
A pre-set order that closes a losing position at a defined level to cap the loss.
The interest credited or debited for holding a position overnight, reflecting the rate differential between the two currencies.
The magnitude and speed of price changes. Higher volatility means wider ranges — and wider risk.
Frequently asked questions
Forex (foreign exchange, or FX) is the global market for exchanging one currency for another. Every forex trade involves buying one currency while simultaneously selling another, which is why currencies are always quoted in pairs such as EUR/USD.
According to the Bank for International Settlements Triennial Survey, global FX turnover averaged US$9.6 trillion per day in April 2025, up 28% from US$7.5 trillion in April 2022. It is the largest financial market in the world.
Yes. Forex is typically traded with leverage, which magnifies losses as well as gains, and prices can move sharply on economic data, central bank decisions and geopolitical events. You can lose more than you expect if risk is not controlled, so never trade money you cannot afford to lose.
The forex market trades 24 hours a day, five days a week, moving from Sydney to Tokyo to London to New York. It opens on Sunday evening (UTC) and closes on Friday evening (UTC). Liquidity is usually deepest when the London and New York sessions overlap.
A pip is the standard unit of price movement — 0.0001 for most pairs and 0.01 for yen pairs. On one standard lot (100,000 units) of a pair quoted in US dollars, such as EUR/USD, one pip is worth US$10; on a mini lot it is US$1 and on a micro lot US$0.10.
Leverage lets you control a position larger than the margin you deposit. For example, 1:30 leverage means US$1,000 of margin can control a US$30,000 position. A 1% adverse move on that position equals a 30% loss of the margin committed, which is why leverage must be used conservatively.
Pairs involving the US dollar dominate: the BIS reports that all ten of the most traded pairs in April 2025 involved the US dollar, which was on one side of 89.2% of all trades. EUR/USD, USD/JPY and GBP/USD are among the best known majors.
There is no universal figure. What matters more is that the capital is genuinely risk capital, that position sizes are small relative to the account (many professionals risk 1–2% or less per trade), and that you understand the product before you begin.
Fundamental analysis studies the economic forces behind a currency — interest rates, inflation, growth and policy. Technical analysis studies price itself — trends, support and resistance, and indicators. Most professional desks combine both, together with an assessment of market sentiment.
Yes. OT PMC offers a managed forex service in which a professional desk trades on your behalf within a signed member agreement and agreed risk limits. Your principal is recorded in your Principal Wallet, and you can see your principal, daily income and every transaction in real time in the member portal. Outcomes are never guaranteed.
Important information
Education onlyThis guide is provided for education and awareness only and is intended for readers aged 18 and over. It is not investment advice, a recommendation or a solicitation to buy or sell any financial instrument, and it carries no guarantee of profit. Forex and CFDs are leveraged products that carry a high level of risk and may not be suitable for everyone. Before making any decision, assess your financial situation, risk tolerance and understanding of the product; decisions remain your own responsibility.