**Forex Trading: The Complete Beginner’s Guide**
*Based on content by [Trading World, YouTube Channel](https://www.youtube.com/watch?v=3D2VHd0IGbA), with additional insights for a comprehensive understanding of the Forex market*
—
## Introduction to Forex Trading
Forex, short for “foreign exchange,” signifies the trading of currencies on a global, decentralized market. It is the largest and most liquid financial market worldwide, with a daily volume exceeding $6 trillion according to the Bank for International Settlements (BIS). Forex trading involves buying one currency while simultaneously selling another, enabling individuals, institutions, and corporations to speculate on the rise and fall of currency values.
Understanding the fundamental elements and strategic implications is crucial before starting in the forex market. The following sections provide a thorough overview for beginners, including practical advice, key terms, and trading strategies.
—
## What is Forex?
– Forex (FX) refers to the international currency exchange market.
– Trading occurs over-the-counter (OTC), meaning transactions happen directly between parties, not on centralized exchanges.
– Currencies are always quoted in pairs, such as EUR/USD (Euro/US Dollar) or USD/JPY (US Dollar/Japanese Yen).
– The first currency in the pair is the “base” currency; the second is the “quote” currency.
– When trading forex, you are speculating whether the base currency will strengthen or weaken against the quote currency.
—
## Major Currency Pairs
Forex trading involves numerous currency pairs, but a handful constitute the “majors.” These pairs generally offer the highest liquidity.
– **EUR/USD**: Euro/US Dollar
– **USD/JPY**: US Dollar/Japanese Yen
– **GBP/USD**: British Pound/US Dollar
– **USD/CHF**: US Dollar/Swiss Franc
– **AUD/USD**: Australian Dollar/US Dollar
– **USD/CAD**: US Dollar/Canadian Dollar
– **NZD/USD**: New Zealand Dollar/US Dollar
These major pairs involve the most traded currencies globally and collectively make up the largest portion of forex market activity.
—
## Why Trade Forex?
Several advantages make forex trading attractive to beginners and professionals alike:
– **Liquidity**: The immense size of the forex market ensures easy entry and exit for most trades due to high trading volumes.
– **24-Hour Access**: The market operates 24 hours a day, five days a week, accommodating different time zones and schedules.
– **Leverage**: Brokers offer high leverage, allowing traders to control larger positions with relatively small capital investments.
– **Low Costs**: Forex trading typically features lower transaction costs compared to equity and commodity markets.
—
## How Forex Trading Works
Forex trading is executed through contracts called “lots.” There are three main lot sizes:
– **Standard lot**: 100,000 units of the base currency
– **Mini lot**: 10,000
Read more on AUD/USD trading.