Forex • Currencies • V6 Long Pro
Understand the world’s currency market.
Learn how forex works, how currency pairs are quoted, what moves exchange rates, how spreads and leverage work, and why interest rates and economic data matter to currencies.
Forex fundamentals
Start with how currencies are traded.
Forex, short for foreign exchange, is the global marketplace where currencies are exchanged. A currency’s value is always expressed relative to another currency.
01 / GLOBAL MARKET
What is forex?
Forex is a decentralized global market for exchanging currencies. It operates across financial centers around the world during the business week.
Learn the basics →02 / QUOTATIONS
Prices come in pairs
Unlike a stock price, a forex quote compares one currency against another, such as EUR/USD or GBP/USD.
Explore pairs →03 / ECONOMICS
Rates reflect expectations
Interest rates, inflation, economic growth, trade and market expectations can all influence currency valuations.
Explore drivers →Understanding currency pairs
Every forex quote has two currencies.
The first currency is the base currency and the second is the quote currency. The quoted rate tells you how much of the quote currency is needed for one unit of the base currency.
EUR / USDMAJOR PAIR
Euro quoted against the U.S. dollar. A widely followed currency pair in global markets.
GBP / USDMAJOR PAIR
British pound quoted against the U.S. dollar, often called cable.
USD / JPYMAJOR PAIR
U.S. dollar quoted against the Japanese yen, another heavily traded pair.
USD / CADMAJOR PAIR
U.S. dollar quoted against the Canadian dollar, with commodity and energy links often discussed.
EUR / GBPMINOR PAIR
Euro quoted against the pound, without the U.S. dollar in the pair.
USD / TRYEXOTIC PAIR
A currency pair involving the U.S. dollar and a currency from an emerging-market economy.
Bid, ask & spread
Forex prices have two sides.
Market quotes generally include a bid and an ask. The difference between them is commonly called the spread and can vary with liquidity and market conditions.
Bid price
The bid is the price at which a market participant can generally sell the base currency in a quoted market.
Think: Selling side of the quote
Changes: With market conditions
Context: Compare with the ask
Ask price
The ask is the price at which a market participant can generally buy the base currency in a quoted market.
Think: Buying side of the quote
Spread: Ask minus bid
Liquidity: Often affects spread size
What moves exchange rates?
Currency prices respond to changing expectations.
There is no single factor that determines a currency’s value. Market participants continually assess economic data, central-bank policy, global conditions and relative prospects between countries.
01 / INTEREST RATES
Central-bank policy
Changes in interest rates and expectations about future monetary policy can influence demand for a currency.
02 / INFLATION
Purchasing power
Inflation data can affect expectations for interest rates and the future value of a currency.
03 / GROWTH
Economic activity
GDP, employment, consumer spending and business activity can influence expectations around an economy.
04 / TRADE
Imports & exports
Trade flows can affect demand for currencies and can be important to a country’s external balance.
05 / SENTIMENT
Risk appetite
Changes in global risk appetite can affect capital flows between currencies and asset classes.
06 / EVENTS
Economic & geopolitical news
Unexpected developments can change market expectations and lead to rapid currency movements.
Leverage in forex
Leverage changes both exposure and risk.
Leverage allows a trader to control a position larger than the cash posted as margin. It can magnify gains and losses, so understanding margin requirements and risk is essential.
Forex market sessions
A global market with major financial centers.
Forex trading activity moves across time zones. Different sessions can have different liquidity and activity characteristics, and overlaps can see increased participation.
Asia-Pacific
Trading activity begins the global forex week across Asia-Pacific financial centers.
London
London is a major global financial center and an important part of European forex activity.
New York
U.S. market participation creates significant activity in major dollar currency pairs.
Session overlaps
Periods when major centers are open simultaneously can bring increased market participation.
Interest rates & currencies
Why central banks matter to forex.
Currency markets continuously assess the relative path of monetary policy between economies. Expectations can change before an official rate decision is made.
Higher-rate expectations
When markets expect relatively higher interest rates in one economy, those expectations can influence demand for its currency, although many other factors also matter.
Policy: Central-bank decisions
Expectations: Future rate path
Data: Inflation and employment
Lower-rate expectations
Expectations for lower rates can affect currency valuations through changing yield expectations and capital flows, with the actual effect depending on broader market conditions.
Policy: Easing expectations
Growth: Economic outlook
Flows: Relative attractiveness
Forex risks
Understand the risks before studying strategies.
Forex trading involves market, leverage, liquidity and execution risks. These risks can vary by broker, instrument, jurisdiction and trading approach.
VOLATILITY
Rapid price movement
Exchange rates can move quickly after economic releases, policy announcements or unexpected events.
LEVERAGE
Magnified exposure
Leverage can increase both potential gains and losses relative to the amount of capital posted.
LIQUIDITY
Changing market depth
Liquidity can vary across currency pairs and market conditions, affecting spreads and execution.
EXECUTION
Slippage & spreads
Actual execution can differ from an expected price, particularly during fast-moving markets.
MACRO
Economic surprises
Unexpected economic data or central-bank communication can change market expectations quickly.
DISCIPLINE
Risk management
A defined approach to position sizing, exposure and losses is an important part of understanding leveraged markets.
Continue learning
Forex topics to explore next.
Build your currency-market knowledge through Financestor’s planned articles and comprehensive guides.
ARTICLE
Forex Trading Explained for Beginners
Start with the core concepts behind the foreign exchange market.
ARTICLEWhat Is the Foreign Exchange Market?
Understand the global structure of currency trading.
ARTICLEUnderstanding Currency Pairs
Learn base currency, quote currency and pair conventions.
ARTICLEWhat Is a Forex Spread?
Understand bid, ask and the difference between them.
GUIDEThe Complete Forex Guide for Beginners
A structured introduction to currency-market concepts.
GUIDEThe Complete Currency Trading Guide
Go deeper into pairs, market drivers and trading terminology.
Economic context
Connect forex with the wider economy.
Use the economic calendar to track major releases and explore financial news to understand the events influencing currencies and other markets.
PLAN • SAVE • GROW
Keep building your market knowledge.
Explore forex, compare it with other markets and use Financestor’s educational resources to understand financial concepts step by step.