The foreign exchange market, also known as FOREX or FX, is the worldwide marketplace where national currencies are traded against one another.
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📘 Forex Basics for Beginners
🌐What is the Forex Market?
The foreign exchange market—commonly known as FOREX or FX—is the global marketplace for trading national currencies against one another. It is the largest financial market in the world, with trillions of dollars traded daily, offering high liquidity and tight spreads.
Participants include individuals, businesses, financial institutions, and central banks.
💬 What are Currency Pairs?
Currencies are always traded in pairs—because you’re simultaneously buying one currency and selling another.
Example: EUR/USD = Euro vs. U.S. Dollar
- EUR is the base currency
- USD is the quote currency
- If EUR/USD = 1.05, it means 1 EUR costs 1.05 USD
Most currency pairs are quoted to four decimal places, except for Japanese yen pairs, which use two decimal places.
📈 What is a Pip in Forex Trading?
Pip stands for “Point in Percentage” and represents the smallest price movement in a currency pair. A pip is typically the last decimal place in a currency price quote.
- For EUR/USD, 1 pip = 0.0001
- For USD/JPY, 1 pip = 0.01
Pips are essential for calculating profits, losses, and spreads.
Currency Codes & Symbols
Every currency has an international currency code and symbol.
| Currency | Code | Symbol |
|---|---|---|
| US Dollar | USD | $ |
| Euro | EUR | € |
| Indian Rupee | INR | ₹ |
| Pounds Sterling (UK) | GBP | £ |
| Japanese Yen | JPY | ¥ |
| Chinese Yuan | CNY | 元 |
| Swiss Franc | CHF | CHF |
| Australian Dollar | AUD | $ |
| Canadian Dollar | CAD | $ |
| New Zealand Dollar | NZD | $ |
| Hong Kong Dollar | HKD | HK$ |
🌍 Major Forex Pairs
The four most traded currency pairs—known as the majors—are:
- EUR/USD (Euro / U.S. Dollar)
- USD/JPY (U.S. Dollar / Japanese Yen)
- GBP/USD (British Pound / U.S. Dollar)
- USD/CHF (U.S. Dollar / Swiss Franc)
These pairs offer high liquidity, tight spreads, and are favored by both beginner and professional traders.
According to regulations from the Reserve Bank of India (RBI), speculative currency trading is restricted unless it involves legitimate business transactions or international payments.