What is Forex Trading?
Currency pairs — what they are
Currencies are always traded in pairs. EUR/USD means Euro vs US Dollar. The first currency is what you are buying or selling. The second is what you are buying or selling it with.
If EUR/USD is at 1.08, one Euro costs $1.08. If it moves to 1.09, the Euro got stronger. If it drops to 1.07, the Dollar got stronger.
The major pairs are: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD. These account for most daily trading volume.
What is a pip?
A pip is the smallest price movement in a currency pair. For EUR/USD, it is 0.0001. If EUR/USD moves from 1.0800 to 1.0850, that is 50 pips.
Brokers charge a spread — the difference between the buy price and sell price. A 1.0 pip spread on EUR/USD means you start each trade 1 pip down. Lower spread = lower cost per trade.
How retail forex trading works
Retail traders access the forex market through a broker. The broker gives you a platform, quotes prices, and executes your trades. You do not own the currency — you are speculating on price movement through a CFD (Contract for Difference).
Most retail forex is traded with leverage. With 1:30 leverage, $1,000 in your account controls $30,000 in the market. This amplifies both profits and losses. A 1% market move becomes a 30% gain or loss in your account.
Who actually trades forex?
| Participant | Purpose | Volume |
|---|---|---|
| Central banks | Manage national currency value | ~5% |
| Commercial banks | Client transactions, proprietary trading | ~40% |
| Corporations | Hedging international business exposure | ~20% |
| Hedge funds | Speculative trading, macro strategies | ~25% |
| Retail traders | Speculation, some hedging | ~10% |
Can retail traders make money?
Most cannot. Every regulated broker must disclose its loss rate. Across the 14 brokers on this site, between 67% and 82% of retail accounts lose money when trading CFDs. These are official numbers from regulated broker disclosures, not estimates.
The primary reasons retail traders lose: leverage amplifies errors, the spread cost means you start every trade negative, and emotional decision-making during losses leads to larger losses.
Retail traders who do profit consistently tend to treat it as a business: strict risk limits per trade (1-2% of account), no emotional trading, automated rules. This takes years to develop.
How to start without risking real money
Every broker on this site offers a demo account with virtual money. This lets you learn the platform, test a strategy, and understand how leverage works before using real funds. Use the demo account for at least 3 months before depositing real money.