## Complete Guide to Forex Trading: Principles, Strategies, and Insights
*Adapted and expanded from the original content in the video by Trading with Rayner ([YouTube source](https://www.youtube.com/watch?v=PL-mk3b_R50))*
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### What is Forex Trading?
Forex, or the foreign exchange market, is a global, decentralized marketplace for the trading of currencies. It is the largest and most liquid financial market in the world, with a daily trading volume exceeding six trillion US dollars. Unlike stock markets with centralized exchanges, the forex market operates 24 hours a day, five days a week, spanning major financial centers across different time zones.
**Key Highlights:**
– Currencies are traded in pairs, like EUR/USD or GBP/JPY.
– The aim of forex trading is to profit from changes in the value of one currency relative to another.
– Market participants include banks, corporations, governments, retail traders, and institutions.
### Fundamentals of Forex Trading
At its core, forex trading is about exchanging one currency for another to profit from price movements. Price changes are driven by a variety of economic, political, and technical factors.
**Main Components:**
– **Currency pairs:** Always quoted as two currencies. The first currency (base) is being bought; the second (quote or counter) is being sold.
– **Pips:** The smallest unit of price movement in a currency pair, usually the fourth decimal.
– **Lots:** Standardized trading sizes, commonly a standard lot (100,000 units), mini lot (10,000 units), or micro lot (1,000 units).
– **Leverage:** Allows traders to control larger positions with a smaller amount of actual capital, increasing both potential profits and risks.
### How Does Forex Trading Work?
Unlike traditional stock exchanges, forex does not have a centralized exchange. Trading is conducted over-the-counter (OTC) via various platforms.
**Main Features:**
– Trades are executed electronically through computer networks.
– Liquidity is deepest during overlapping trading sessions, namely London and New York.
– Currency pairs are classified as majors, minors, and exotics:
– **Majors:** Include the US dollar, like EUR/USD, GBP/USD, and USD/JPY.
– **Minors:** Do not include USD but feature other major currencies.
– **Exotics:** Pair a major with a currency from a smaller or emerging economy.
### Why Trade Forex?
Forex trading offers distinct characteristics that make it attractive to different types of participants.
**Advantages:**
– **High Liquidity:** The massive scale ensures quick order execution and tight spreads.
– **Accessibility:** Low entry barriers; accounts can be opened with modest sums.
– **Flexibility:** The ability to trade almost around the clock.
– **Leverage:** Amplifies potential returns (and risks).
– **Diverse Strategies:** Opportunities for both long and short trades, in trending or ranging markets.
### Forex Trading Strategies
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