Forex Fundamentals·Currency Pairs & The Forex Market
What is Forex?
The Biggest Market You've Never Heard Of
Forex — short for foreign exchange — is the global marketplace where currencies are traded against each other. Every time you swap dollars for euros at the airport, you're participating in forex. The difference is that professional traders do this electronically, 24 hours a day, five days a week, from London trading floors to Tokyo bank desks to algorithmic servers in New Jersey data centers.
DAILY TURNOVER
$7.5 trillion
BIS Triennial Survey 2022. Roughly 30× the daily volume of the entire US stock market. The largest market in the world by a wide margin.
30× US equities
STRUCTURE
Decentralized · OTC
No central exchange. A network of banks, brokers, and electronic venues connected globally. The ledger is everyone's at once.
no closing bell weekdays
PARTICIPANTS
Banks · funds · retail · HFT
Central banks, commercial banks, hedge funds, corporates, and retail traders. Every player you've heard of is in this market.
4 sessions follow the sun
Mind-blowing scale
The forex market trades over $7.5 trillion every single day according to the Bank for International Settlements (BIS) 2022 Triennial Survey. That's roughly 30x the daily volume of the entire US stock market. If you stacked $7.5 trillion in $100 bills, the pile would reach the Moon and back — twice.
The forex market has no central exchange like the NYSE or NASDAQ. It operates as an over-the-counter (OTC) network — a decentralized web of banks, brokers, and electronic networks connected digitally around the world. This decentralization is what allows it to run virtually 24 hours, as trading simply shifts from one financial center to the next as the Earth rotates.
Definition
Over-the-Counter (OTC)
A decentralized market where trading happens directly between two parties (e.g., bank-to-bank, broker-to-client) without a central exchange. The forex market is the world's largest OTC market, meaning there's no single building or exchange where all trades are executed.
Definition
Liquidity
The ability to buy or sell an asset quickly without significantly affecting its price. High liquidity means tight spreads and instant execution. Forex is the most liquid market in the world — you can enter and exit million-dollar positions in milliseconds on major pairs.
A Brief History of Forex
The modern forex market was born in 1971 when President Nixon ended the Bretton Woods system, which had pegged currencies to the US dollar (and the dollar to gold). Once currencies were allowed to float freely, their values were determined by supply and demand — and the forex market as we know it was born. The introduction of electronic trading in the 1990s then democratized access, allowing retail traders to participate alongside institutions for the first time.
| Era | Key Event | Impact on Forex |
|---|---|---|
| 1944 | Bretton Woods Agreement | Fixed exchange rate system — currencies pegged to USD at $35/oz gold |
| 1971 | Nixon Shock | US abandons gold standard — birth of floating exchange rates |
| 1985 | Plaza Accord | G5 nations agree to weaken USD — dollar drops 50% over two years |
| 1992 | Black Wednesday | George Soros shorts GBP, forces UK out of ERM — profits $1B+ in a day |
| 1996-2000 | Online brokers emerge | Retail traders gain access for the first time via internet platforms |
| 2015 | SNB depeg (Jan 15) | Swiss National Bank removes EUR/CHF floor — CHF surges 30% in minutes |
| 2020 | COVID pandemic | USD surges on safe-haven flows, then reverses as Fed floods system with liquidity |
The Soros trade
In September 1992, George Soros famously shorted the British pound against the Deutsche Mark, betting that the UK couldn't maintain its ERM peg. He built a $10 billion short position. When the Bank of England capitulated and exited the ERM on September 16 (Black Wednesday), the pound collapsed and Soros reportedly netted over $1 billion in profit in a single day — proving that even central banks can't always fight the market.
Who Trades Forex?
The forex market is a complex ecosystem with many different participants, each with different motivations. Understanding who else is in the market helps you understand why prices move the way they do.
| Participant | Why They Trade | Share of Volume | Typical Trade Size |
|---|---|---|---|
| Central Banks | Manage national currency reserves & monetary policy | ~5% | $100M – $1B+ |
| Commercial Banks | Facilitate client transactions & proprietary trading | ~40% | $10M – $500M |
| Hedge Funds & Asset Managers | Speculation and portfolio hedging | ~30% | $1M – $100M |
| Corporations | Convert revenue from international operations | ~10% | $1M – $50M |
| Retail Traders | Speculation & income generation | ~5-7% | $100 – $100K |
| Algorithmic/HFT Firms | High-frequency market making & arbitrage | ~10-15% | Millions of small trades |
As a retail trader, you're swimming in the same ocean as massive institutional players. But don't be intimidated. The sheer size and liquidity of the market means there's room for everyone. Your advantage as a small trader is agility — you can enter and exit positions instantly without moving the market, something a hedge fund managing billions can't do.
Why Trade Forex?
A
Forex Advantages
- Open 24 hours, 5 days a week — trade around your schedule
- Extremely high liquidity — tight spreads on major pairs
- Low barrier to entry — start with as little as $50
- Profit in rising AND falling markets (go long or short)
- No single entity can corner the market
- Leverage allows controlling large positions with small capital
- Low transaction costs compared to stocks or futures
- Massive variety — dozens of currency pairs to trade
B
Forex Challenges
- Leverage can amplify losses just as quickly as profits
- Requires discipline and a written trading plan
- News events cause sudden, violent volatility spikes
- Over-trading is a common and costly beginner mistake
- Scams and unregulated brokers exist — due diligence required
- The 24-hour nature can lead to unhealthy screen time
- Most retail traders lose money (industry statistics: ~70-80%)
- Emotional control is harder than most people expect
The 70-80% statistic
Regulated brokers are required to disclose that roughly 70-80% of retail traders lose money. This doesn't mean forex is a scam — it means most people trade without proper education, risk management, or discipline. By completing this course and practicing on paper first, you're already separating yourself from that majority.
Markitel advantage
Markitel gives you AI-generated signals and a built-in paper trading account so you can practice without risking real money. The platform also tracks your performance, shows your win rate, and helps you identify patterns in your trading behavior. Start on paper before going live.
Forex vs Other Markets
| Feature | Forex | Stocks | Crypto | Futures |
|---|---|---|---|---|
| Trading Hours | 24/5 (Sun evening – Fri evening) | 6.5 hrs/day (9:30-4 ET) | 24/7 | Near 24/5 |
| Daily Volume | $7.5 trillion | $250-500 billion | $50-100 billion | $2-3 trillion |
| Minimum Capital | $50-500 | $500-25,000 (PDT rule) | $10+ | $2,000-10,000 |
| Typical Leverage | 1:30 – 1:500 | 1:2 – 1:4 | 1:1 – 1:100 | 1:10 – 1:20 |
| Short Selling | As easy as going long | Requires borrowing shares | Available on some exchanges | Built into contract design |
| Regulation | CFTC/NFA (US), FCA (UK), ASIC (AU) | SEC, FINRA | Varies widely | CFTC/NFA |
Knowledge check
Approximately how much volume does the forex market trade per day?
Knowledge check
Why is the forex market considered the most liquid market in the world?