π± What is Forex?
Forex (short for Foreign Exchange) is the global market where currencies are bought and sold. It is the largest financial market in the world β by a wide margin.
Every time a company pays an international supplier, a tourist exchanges money at an airport, or a central bank adjusts its reserves, they are participating in the Forex market.
π How big is the Forex market?β
Charles Schwab β 'Investing Basics: Forex' (7 min) β covers currency pairs, how margin and leverage work, lot sizes, and what determines exchange rates β the foundations of the Forex market.
The Forex market trades $7.5 trillion every single day. To put that in perspective:
- That is more than 37Γ the volume of all global stock markets combined
- More than the annual GDP of Japan and Germany added together
- Operating 24 hours a day, 5 days a week, across every time zone on Earth
π¬ Forex explained for beginnersβ
The Trading Channel β 'Forex Trading For Beginners' (27 min, 1.9M views) β the most-watched beginner Forex guide on YouTube. Covers currency pairs, pips, leverage, how orders work, and how to start trading.
π Who trades Forex and why?β
Forex participants range from the largest institutions on Earth to individual retail traders:
| Participant | What they do |
|---|---|
| π¦ Central banks | Manage national currency reserves and interest rates (e.g. the US Federal Reserve, the European Central Bank) |
| π’ Commercial banks | Facilitate currency exchange for clients and trade for profit |
| ποΈ Multinational companies | Convert revenues between currencies β Apple selling iPhones in Japan receives yen and converts to dollars |
| π Hedge funds | Speculate on currency movements for profit |
| π€ Retail traders | Individuals speculating on currency direction via brokers |
π± Currency pairs β the basicsβ
In Forex, currencies are always traded in pairs. You are simultaneously buying one currency and selling another.
The most traded pair in the world is EUR/USD β the Euro versus the US Dollar.
Reading a currency pair:
EUR / USD = 1.0852
β β β
Base Quote Price
β 1 Euro buys 1.0852 US Dollars
The first currency (EUR) is the base currency β the one you are buying or selling. The second currency (USD) is the quote currency β the one you are pricing the base in.
Most traded Forex pairsβ
| Pair | Name | Share of daily volume |
|---|---|---|
| EUR/USD | Euro / US Dollar | ~22% |
| USD/JPY | US Dollar / Japanese Yen | ~13% |
| GBP/USD | British Pound / US Dollar | ~10% |
| AUD/USD | Australian Dollar / US Dollar | ~5% |
| USD/CAD | US Dollar / Canadian Dollar | ~4% |
π’ Key concepts: pip, spread, leverageβ
What is a pip?β
A pip (percentage in point) is the smallest standard price move in a Forex pair. For EUR/USD, one pip = 0.0001.
:::info Example
EUR/USD moves from 1.0852 to 1.0853 β that is a 1-pip move.
If you are trading 100,000 units (one "standard lot"), 1 pip = $10 in profit or loss. If you are trading 10,000 units (one "mini lot"), 1 pip = $1.
:::
What is the spread?β
The spread is the difference between the price at which you can buy (ask) and the price at which you can sell (bid). It is how brokers and exchanges make money on each trade.
Bid: 1.08520 (sell price)
Ask: 1.08525 (buy price)
Spread: 0.5 pip
If you open a trade and immediately close it, you lose the spread β it is the cost of entry.
What is leverage?β
Leverage allows you to control a large position with a small amount of capital.
:::warning Leverage amplifies both gains and losses
With 10:1 leverage, a $1,000 deposit controls a $10,000 position. A 1% price move = 10% gain or loss on your capital.
With 100:1 leverage (common in traditional Forex), a 1% move against you wipes your entire deposit.
Leverage is powerful β and it must be treated with caution.
:::
Try it β interactive leverage calculatorβ
Adjust the inputs below to see how lot size, leverage, and pip moves translate into real dollar outcomes:
Illustrative only β EUR/USD major pair, pip = 0.0001. Actual P&L depends on pair, execution price, and any swap fees.
π How pip values are calculated β the mathβ
Pip values tell you exactly how much money you gain or lose per pip move, depending on your lot size.
The formula:
For pairs where USD is the quote currency (e.g., EUR/USD, GBP/USD):
Pip value = (0.0001 / Exchange Rate) Γ Lot Size
Since EUR/USD is already quoted in USD, and 0.0001 / 1 = 0.0001, and for a standard lot (100,000 units):
Pip value = 0.0001 Γ 100,000 = $10 per pip
Pip value table β standard lot (100,000 units)β
| Pair | Pip size | Pip value (1 standard lot) |
|---|---|---|
| EUR/USD | 0.0001 | $10.00 |
| GBP/USD | 0.0001 | $10.00 |
| USD/JPY | 0.01 | ~$9.09 (varies with rate) |
| AUD/USD | 0.0001 | $10.00 |
| EUR/GBP | 0.0001 | ~$12.50 (GBP/USD dependent) |
| USD/CHF | 0.0001 | ~$11.25 (CHF/USD dependent) |
Lot size comparisonβ
| Lot name | Units | EUR/USD pip value | Typical margin at 1:100 |
|---|---|---|---|
| Standard | 100,000 | $10.00 | $1,000 |
| Mini | 10,000 | $1.00 | $100 |
| Micro | 1,000 | $0.10 | $10 |
This is why HyperFX uses standardized lots β they give traders a predictable and reproducible unit of risk.
πΈ How the spread is your real costβ
When you open a position, you do not pay a visible "entry fee." Instead, you pay the spread β the gap between the buy price and the sell price. This is built into every trade automatically.
Calculating spread costβ
For EUR/USD with a 1.5 pip spread on a mini lot:
Spread cost = 1.5 pips Γ $1.00/pip (mini lot) = $1.50 per round trip
On a standard lot, the same spread costs $15 β before the trade even moves.
Spread comparison: HyperFX vs traditional brokerβ
| Pair | Typical retail broker | HyperFX |
|---|---|---|
| EUR/USD | 1.0β2.0 pips | See platform for live spread |
| GBP/USD | 1.5β2.5 pips | See platform for live spread |
| USD/JPY | 1.0β1.5 pips | See platform for live spread |
| GBP/JPY | 2.5β4.0 pips | See platform for live spread |
:::info How HyperFX spreads work differently
On HyperFX, spread revenue does not go to a broker β it flows into the liquidity pool, split among all liquidity providers.
:::
ποΈ Central banks and Forex β why interest rates move currenciesβ
No single force moves currency prices more consistently than central bank policy.
The mechanism:
- A central bank (e.g., the US Federal Reserve) raises its benchmark interest rate
- Higher rates mean investors can earn more by holding USD-denominated assets
- Demand for USD increases β the dollar strengthens against other currencies
- EUR/USD falls; USD/JPY rises
The major central banks and their currencyβ
| Central bank | Currency | Website |
|---|---|---|
| US Federal Reserve (Fed) | USD | federalreserve.gov |
| European Central Bank (ECB) | EUR | ecb.europa.eu |
| Bank of Japan (BOJ) | JPY | boj.or.jp |
| Bank of England (BOE) | GBP | bankofengland.co.uk |
| Swiss National Bank (SNB) | CHF | snb.ch |
| Reserve Bank of Australia (RBA) | AUD | rba.gov.au |
| Bank of Canada (BOC) | CAD | bankofcanada.ca |
Key events that move markets:
- Rate decisions β the most-anticipated events in Forex; even the wording of announcements matters
- Inflation data (CPI, PCE) β predicts future rate moves
- Employment data (Non-Farm Payrolls for USD) β central banks use employment in rate decisions
- GDP releases β measures economic health, influences rate expectations
πΊοΈ Pairs classification β major, minor, exoticβ
Not all currency pairs are equal. They differ in liquidity, spread, volatility, and how they behave in market stress.
Major pairs β the G7 blocβ
Major pairs always include USD and account for ~80% of all Forex volume. They have the tightest spreads and highest liquidity.
| Pair | Name | Typical spread |
|---|---|---|
| EUR/USD | Euro / US Dollar | 0.1β1.5 pips |
| USD/JPY | US Dollar / Japanese Yen | 0.1β1.5 pips |
| GBP/USD | British Pound / US Dollar | 0.5β2.0 pips |
| USD/CHF | US Dollar / Swiss Franc | 0.5β2.0 pips |
| AUD/USD | Australian Dollar / US Dollar | 0.5β2.0 pips |
| USD/CAD | US Dollar / Canadian Dollar | 0.5β2.0 pips |
| NZD/USD | New Zealand Dollar / US Dollar | 0.5β2.5 pips |
Minor pairs (crosses) β no USDβ
Minor pairs, or "crosses," pair two major currencies but exclude USD. Slightly wider spreads, still very liquid.
| Pair | Name | Typical spread |
|---|---|---|
| EUR/GBP | Euro / British Pound | 1.0β2.5 pips |
| EUR/JPY | Euro / Japanese Yen | 1.0β2.5 pips |
| GBP/JPY | British Pound / Japanese Yen | 2.0β4.0 pips |
| EUR/AUD | Euro / Australian Dollar | 1.5β3.0 pips |
| AUD/JPY | Australian Dollar / Japanese Yen | 1.5β3.0 pips |
Exotic pairs β emerging marketsβ
Exotic pairs pair a major currency with an emerging market currency. Much wider spreads, higher volatility, less predictable.
| Pair | Name | Typical spread |
|---|---|---|
| USD/TRY | US Dollar / Turkish Lira | 10β50+ pips |
| USD/ZAR | US Dollar / South African Rand | 10β40 pips |
| USD/MXN | US Dollar / Mexican Peso | 5β20 pips |
| EUR/TRY | Euro / Turkish Lira | 15β60 pips |
:::tip HyperFX and pair support
HyperFX launches with the most liquid Forex pairs (majors + key crosses) and adds new pairs via DAO vote as liquidity and oracle coverage become available.
:::
π’ How traditional Forex trading worksβ
Investing.com β 'What is Forex Trading?' (2 min) β a concise overview of how currency trading works through traditional brokers: account setup, platform, order execution, and risk management.
To trade Forex today, most people go through a regulated broker β a company that:
- Opens a trading account for you (KYC: passport, proof of address required)
- Holds your deposited funds on their balance sheet
- Shows you prices on their internal trading platform
- Executes your trades against their own book or other clients
The key problem: you never see the order book. You trust the broker's price feed, their execution quality, and their solvency. High-profile broker insolvencies (FXCM, Alpari UK) have shown that this trust has limits.
HyperFX moves Forex trading onto a public blockchain β every price, every trade, and every balance is verifiable on-chain.
π Go deeper β study resourcesβ
π Official reports & dataβ
| Resource | Description |
|---|---|
| BIS Triennial Survey 2022 | The authoritative source for Forex market size data β published every 3 years by the Bank for International Settlements |
| CME FX Products | Largest regulated Forex futures exchange |
π₯ Educational videos (English)β
| Video | Channel | Duration |
|---|---|---|
| Forex Trading for Beginners | The Trading Channel | 21 min |
| How Currency Exchange Works | TED-Ed | 5 min |
| What is the Forex Market? | Investopedia | 6 min |
π Reading guidesβ
| Resource | Description |
|---|---|
| Investopedia β Forex Market | Comprehensive beginner guide |
| BabyPips School of Pipsology | The most popular free Forex education course β starts from absolute zero |
| Investopedia β Pip | Pip calculation explained |
β‘οΈ What's next?β
- What is a CFD? β β The instrument that lets you trade currency direction without owning the currency.
- What is HyperFX? β β How HyperFX brings Forex onto the blockchain.