What is Forex Trading? The Basics.

Know all about one of the largest trading markets in the world

Forex trading is trading in foreign exchange markets, converting currencies. It is often called FX trading, and is one of the largest trading markets in the world. Every day approximately five to six trillion Pound Sterling is FX traded, providing endless monetary possibilities to Forex Traders. Let us explain what is Forex trading all about.

Forex Traders UK is searching for talented FX Traders!

We are funding aspiring trading talents with our capital. If you have the skills, but lack capital to invest, Forex Traders UK will provide you with funds up to £1,000,000, no questions asked. Start with £10,000 to £70,000 in capital, and show us your Forex trading skills. When you are successful, you will automatically graduate to a higher tier and receive extra capital. It up to you to determine when you are capable of handling a much as £1,000,000 in capital.

Risk-free trading 

FX Trading with Forex Traders UK is 100% risk-free. We will cover all of your losses. It goes without saying that you will first have to earn our trust. Therefore, you will start with a capital of £10,000 to £70,000. Numbers don’t lie, it’s the results that count. Show us your trading skills, and let us know your worth. We will fund you with more capital when you prove to have the skills. And, even when you are trading with £1,000,0000 of our funds, the risk is still on us. At that point, you will have proven to have the skills, and losses are just the risk of the business. We know fact better than anyone. A business that doesn’t take risks won’t seize any opportunities either.

Split profit

So, what is the catch? There is none! We split profits with you, you get 50% of all profits, and we take 50% as a compensation for our capital investment and risk. No more, no less. When you start trading and earning money, you earn it for yourself. You will be able to create a new income stream with your own trading skills. So with Forex Trading UK it is possible to start Forex Trading without any capital at all. 

What is Forex trading all about?

Forex trading is somewhat different from other types of trading. FX trading takes places between two individual traders directly. There are no centralized markets like the stock exchange, so the Forex market is essentially run by an international network of banks and other financial institutions. FX trading takes place all around the world, in London, New York, Sydney and Tokyo. Forex trading is a 24-hour trading business; it simply does not stop.

Trading derivatives

Similar to other trading markets, most FX traders do not actually buy or sell currencies. They predict exchange rate changes and anticipate to that. Trading derivatives is the most popular way to trade as it allows you to speculate on a trading movement without actually owning a currency.

Different types of Forex markets

There is no one single global Forex market, but there are several types of FX-markets. The most common are Spot Forex Market, Forward Forex Market, and Futures Forex Market.

Spot Forex Market

Spot Forex Market is all about the physical exchange of two currencies (the so-called currency pair). The exchange is done at the exact same “spot” where the trade is done. This is the most direct form of FX trading.

Forward Forex Market

In the Forward Forex Market, a customizable contract is agreed upon, to buy or sell a certain amount of currency at a specified currency exchange rate, at a set date in the future. In this way you can speculate on an exchange rate changing in the future, giving you the obligation to buy or to sell on the agreed conditions. In this way, you don’t need to actually buy the currency at the actual trading moment, but you will have to pay an initial deposit (called a margin) for this transaction.

Futures Forex Market

The Futures Forex Mark is a standardized agreement to buy or sell a certain amount of currency at a specific price, at a specific date in the future. Most of the times, these transactions happen through central markets. This currency exchange contract does not give you the right to buy or sell, but it is a binding obligation to buy or sell. But again, the trading date and exchange date are not the same, just like the Forward Forex Market.

Four types of Forex exchange pairs

What is Forex trading all about? Forex trading means exchanging one currency for another currency, so essentially you will always be trading a currency pair. Put simply, there are only two currencies involved with every trade.

Each international currency is coded with a unique three-letter-abbreviation. Typically, the code consists of a letter combination of the first letters of the country and the currency name. Obviously, the three most widely used currencies in the world are also the most traded, and form the three most common pairs (the order does not make any difference for the trade itself):

  • British Pound / Euro (GBP / EUR)
  • British Pound / US Dollar (GBP / USD)
  • Euro / US Dollar (EUR / USD)

Most banks and financial institutions split currency exchange pairs into one of the categories mentioned below, in order to better structure the trades. There are around 180 currencies all over the world, resulting in over 15,000 currency pairs. Therefore, this structure is very much needed. Research shows that there are about 70 currency pairs that are most commonly traded by FX traders. So, what is Forex trading in terms of currency pairs?

1.    Major currency exchange pairs

There are in total seven currencies worldwide that cover around 80% of the global Forex Trading Market. Besides the above-mentioned British Pound (GBP), Euro (EUR) and United States Dollar (USD), the remaining top-7 include the Australian Dollar (AUD), the Swiss Franc (CHF), the Japanese Yen (JPY) and the New Zealand Dollar (NZD).

All major pairs involve the US Dollar in combination with the top 7 major currencies, including the Canadian Dollar (CAD). The 7 major pairs are:

  • US Dollar / British Pound (USD / GBP), also known as the “Cable”
  • US Dollar / Euro (USD / EUR), which is named “Fiber”
  • US Dollar / Japanese Yen (USD / JPY), referred to as “Ninja”
  • US Dollar / Swiss Franc (USD / CHF), known as “Swissy”
  • US Dollar / Australian Dollar (USD / AUD), named “Aussie”
  • US Dollar / New Zealand Dollar (USD / NZD), called the “Kiwi”
  • US Dollar / Canadian Dollar (USD / CAD), also referred to as “Loonie”

2.    Minor currency exchange pairs

The minor pairs regarding currency exchange are less frequently traded compared to the major pairs. They often feature the 7 major currencies traded against each other.

These minor pairs are also often referred to as “crosses,” or “cross pairs.” They are essentially the most important currency pairs that don’t include the US Dollar. Most currencies were previously fixed to the US Dollar, and in order to be exchanged, they first had to be exchanged to the US Dollar. When the crosses were introduced, traders became able to exchange other currencies directly, without having to exchange them to the US Dollar first.

The 7 minor currency pairs are:

  • Euro / British Pound (EUR / GBP), also known as the “Chunnel”
  • Euro / Japanese Yen (EUR / JPY), with the nick name “Euppy”
  • British Pound / Japanese Yen (GBP / JPY), known as “Guppy”
  • British Pound / Canadian Dollar (GBP / CAD)
  • Swiss Franc / Japanese Yen (CHF / JPY)
  • Euro / Australian Dollar (EUR / AUD)
  • New Zealand Dollar / Japanese Yen (NZD / JPY)

3.    Regional currency exchange pairs

Regional pairs are classified by a region. Examples of typical regions are Australasia, with common regional pairs Australian Dollar / New Zealand Dollar (AUD / NZD) and Australian Dollar / Singapore Dollar (AUD / SGD), or Scandinavia, with common pairs as Euro / Norwegian Krone (EUR / NOK) and Euro / Danish Krone (EUR / DKK).

4.    Exotics currency exchange pairs

Exotic pairs are currency trades of a major currency against the currency of an emerging country, such as Poland, Mexico or Brazil. Typical exotic pairs are US Dollar / Polish Zloty (USD / PLN), British Pound / Mexican Peso (GBP / MXN), or Euro / Brazilian Real (EUR / BRL).

How does the Forex Price Work?

The first currency in a currency pair is called the Base Currency, while the second currency of the currency pair is the Quote Currency. Currency rate or price of a Forex pair is how much one unit of the base currency is worth in terms of the quote currency. When, for example, the GBP / USD price is set at 1.40, this means that 1 British Pound is worth 1.40 US Dollars.

If the British Pound rises compared to the US Dollar, this means that the pair’s price will increase (for example, to a rate of 1.50). When the currency rate of the British Pound decreases, it means the pair’s price will go down as well (for example, to a rate of 1.30).

This is, then, the essence of Forex trading. When you think that the base currency is likely to strengthen against the quote currency, you can buy the pair, an action which is referred to as “going long.” On the contrary, when you thing the rate is going to fall, it is time to sell the pair, referred to as “going short.”

How do you earn money with Forex trading?

What is Forex Trading without earning money? You research everything about the currencies which you are trading, taking into account all of the price movements and economic developments which might influence the exchange rate of a currency. However, you will obviously need to trade large sums in order to earn substantial amounts of money. Changes in currency rates can often be very subtle, but when you move large amounts of money, this can result in huge earnings with Forex trading.

Creating FX leverage

When you are Forex Trading, the margin of your deals is essential. By calculating your margin, also known as your “initial deposit,” you pay a relatively small sum in order to close a deal. Your margin is often expressed as a percentage of your FX position. 

For example, when you make a GBP / USD trade, you might need an initial deposit of 2% of the total value of the position. This means that when you want to make a trade of £10,000, you will have to initially deposit a sum of £200 to close the deal.

Advantages and risks of Forex trading

For example, when you make a GBP / USD trade, you might need an initial deposit of 2% of the total value of the position. This means that when you want to make a trade of £10,000, you will have to initially deposit a sum of £200 to close the deal.

However, you should be aware that this leverage also brings the risk of amplified losses. In fact, a deal is made for the entire amount. That could mean that you have an obligation to buy or sell the deal in its entirety. This occurs whether the deal goes in the direction you expected or the exact opposite. With this kind of leveraged trading, it is therefore extremely important to manage your risks.

Is Forex trading safer than stocks?

What is Forex trading without risk? The risk of Forex trading greatly depends on your trading profile. What goals do you set, what is your trading style, and what is your risk-tolerance? With Forex trading, more leverage is involved, and trades are far less regulated in comparison to the stock market. This makes this market incredibly lucrative, however, on the other hand, it also makes it much riskier. Therefore, this market is all about managing your risks wisely in order to maximize your profits.

What is Forex trading for you: start Forex trading with Forex Traders UK!

Forex Traders UK will fund you with up to £1,000,000 when you prove to have the right skills. You can start with £10,000 to £70,000 with no questions asked, so show us your Forex trading skills! FX Trading with Forex Traders UK is entirely risk-free for you. We cover your losses, and you can keep 50% of your profits. It is a simple win-win situation. Start Forex Trading without any capital at all, and become a Forex Trader with us. 


FTUK Funded Account Disclaimer

CFTC Rule 4.41 – Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, because the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

All our funded accounts come with a fixed equity stop out level. Once the account equity level gets below this fixed stop out bar, we will close all running trades and disable trading and access. The stop out level is a fixed value for each funding level, this means that any profit which has been made by the trader increases the loss allowance.

Order in

10% Off