Foreign exchange, or forex, involves exchanging one currency for another. Traders can access currency exposure through different products, including deliverable currency, retail over-the-counter contracts and exchange-traded futures. These products have different counterparties, costs and account protections.

Reading a currency pair

The first currency is the base and the second is the quote. EUR/USD at a hypothetical 1.0850 means one euro is priced at 1.0850 US dollars. Buying the pair creates exposure that benefits from a rising quotation; selling benefits from a falling quotation, before costs.

For a 10,000-euro position, a rise from 1.0850 to 1.0900 represents a $50 gross gain on a long position: 10,000 × 0.0050. A short position would lose the same gross amount. Spreads, commissions and financing affect the net result.

Pips and position size

A pip is a conventional price unit, commonly 0.0001 for non-yen pairs and 0.01 for yen-quoted pairs. Platforms can display smaller fractional-pip increments. Our pip calculation guide shows how to convert a move into money.

A conventional standard lot represents 100,000 base-currency units, a mini lot 10,000 and a micro lot 1,000. Brokers can use different minimum sizes or contract specifications. A micro lot is smaller than a standard lot; that alone does not make its risk suitable for your account.

How retail pricing works

The broader foreign-exchange market is decentralized. A retail OTC dealer provides its own executable quotations and contractual terms; there is no single consolidated retail order book that every customer sees. An exchange-traded currency future is a different contract with an expiry and exchange specifications.

The bid is the price at which you can sell and the ask the price at which you can buy. The spread is their difference. Costs can also include commission, currency conversion and overnight financing. Check the actual product's schedule rather than assuming a named pair always has a particular spread.

Hours and event risk

Retail currency trading is generally available across the business week, following activity through Asia, Europe and the Americas. Broker hours, holidays and daylight-saving changes matter. There is no universally best four-hour window: liquidity and volatility depend on the pair, venue and events.

Central-bank decisions, inflation releases and unexpected news can move prices abruptly. Higher activity does not guarantee tighter execution during a release. Major pairs are not predictably profitable merely because they are widely traded.

Leverage and provider checks

Leverage means a deposit can support a larger exposure. In the example above, the $50 move comes from the 10,000-euro position, regardless of how little collateral was required. A margin requirement is not your maximum possible loss.

Identify the entity offering the account, whether it can serve your residence and which protections apply. The CFTC's forex fraud guidance and registration checks are useful for US-facing retail providers. Other countries apply their own rules.

A demo account can help you learn quotations and order entry. It does not validate live fills or establish an edge. Before depositing, explain the position size, financing cost, liquidation conditions and worst plausible execution outcome in money rather than relying on an arbitrary minimum starting balance.

Risk Disclaimer: Trading involves substantial risk of loss. Past performance is not indicative of future results. See our full risk disclaimer.