Forex Trading: A Beginner’s Guide

Forex (FX) is a portmanteau of foreign currency and exchange. Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, or tourism. According to a 2019 triennial report from the Bank for International Settlements (a global bank for national central banks), the daily trading volume for forex reached $6.6 trillion in 2019.1

Trading currencies can be risky and complex. Because there are such large trade flows within the system, it is difficult for rogue traders to influence the price of a currency. This system helps create transparency in the market for investors with access to interbank dealing.

Retail investors should spend time learning about the forex market and then researching which forex broker to sign up with, and find out whether it is regulated in the United States or the United Kingdom (U.S. and U.K. dealers have more oversight) or in a country with more lax rules and oversight. It is also a good idea to find out what kind of account protections are available in case of a market crisis, or if a dealer becomes insolvent.

Read on to learn about the forex markets, what it's used for, and how you can get started trading.