Forex (foreign exchange) is the global market where currencies are traded against each other. Banks, companies, pension funds and individuals exchange trillions of euros there every day. There is no central exchange: trading runs through a network of banks and brokers, five days a week, almost 24 hours a day.
Currency pairs: you always buy one currency with another
On the forex market you always trade a currency pair, such as EUR/USD. The first currency is the base currency, the second the quote currency. A rate of 1.0850 means one euro costs 1.0850 US dollars.
- If you buy EUR/USD, you expect the euro to strengthen against the dollar.
- If you sell EUR/USD, you expect the opposite.
The most traded pairs are called majors: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD and NZD/USD. They usually have the lowest costs.
How do retail traders trade forex?
Retail traders usually don't buy actual currency. They trade through a CFD (contract for difference), speculating on the price movement without owning the currency. Read how that works in What is a CFD?. CFDs use leverage: you only put up part of the position value as collateral. That magnifies both potential gains and potential losses. Read more in Leverage and margin.
What drives exchange rates?
Central bank interest rate decisions, inflation figures, economic growth, political news and market sentiment. Prices can move sharply within seconds, especially around major announcements.
The main risks
- Leverage: a small price move against you can cost a large part of your deposit.
- Volatility: prices can move quickly and unexpectedly on news.
- Costs: spreads, commissions and financing add up if you trade often or hold positions for long.
- Unreliable firms: only trade with a licensed broker. Here's how to check.
Most retail CFD traders lose money. Only trade with money you can afford to lose, and practise on a demo account first.
Where to start
- Learn the basics: pips, spreads, leverage and margin.
- Look at the costs a broker charges.
- Compare only regulated brokers and practise with a demo account.
Frequently asked questions
Is forex trading legal in the EU?
Yes. You can trade with a broker licensed by an EU/EEA regulator that is allowed to offer its services in your country under the European passport.
How much money do I need to start?
Some brokers have a low or no minimum deposit, but small amounts combined with leverage remain risky. Start with a demo account and only trade with money you can afford to lose.
When is the forex market open?
From Sunday evening to Friday evening (Central European Time), almost around the clock. Trading moves from Asia through Europe to America. The market is closed at weekends.
Brokers in this article
- EUR/USD cost
- €9.22
- Min. deposit
- €50
- Platforms
- 2
Visit eToroRead the review of eToroAdvertisement: we may receive a fee if you open an account through this link. This never changes our scores.
- EUR/USD cost
- €11.98
- Min. deposit
- €100
- Platforms
- 2
Visit Plus500Read the review of Plus500Advertisement: we may receive a fee if you open an account through this link. This never changes our scores.
Editorial team
- Follows a fixed, public review methodology
- Verifies licences directly with the regulator
- Takes costs from brokers' official price lists