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FX Handbook

Forex Basics: Learn Forex Trading from Scratch

Forex (foreign exchange) is the global market where currencies are traded against each other in pairs such as EUR/USD. Traders profit or lose from changes in exchange rates. To start, you need to understand a handful of core concepts — currency pairs, pips, lots, leverage, margin and spreads — which this section explains step by step.

Where to start

Work through these topics in order — each one builds on the previous:

  1. What forex is and how the market is organised.
  2. Currency pairs: base and quote currencies, and how to read a quote.
  3. Pips and lots: how price moves are measured and how much they are worth.
  4. Leverage and margin: how traders control large positions with a small deposit — and why that multiplies risk.
  5. Costs: spreads, commissions and overnight swaps.
  6. Orders: market, limit and stop orders, stop losses and take profits.

beginner beginner

Key terms

  • Contract size

    Contract size is the number of units of the base currency in one lot. For a standard forex lot it is commonly 100,000 units.

  • Limit order

    A limit order is an order to buy or sell at a set price or better. A buy limit is placed below the current price and a sell limit above it.

  • Liquidity

    Liquidity is how easily a currency pair can be bought or sold without moving its price much. Highly liquid pairs tend to have tighter spreads and less slippage.

  • Market order

    A market order is an order to buy or sell straight away at the best available price. Buy orders fill at the ask and sell orders at the bid.

  • Pipette

    A pipette is one tenth of a pip. It is the fifth decimal place on most currency pairs and the third on pairs quoted in Japanese yen.

  • Slippage

    Slippage is the difference between the price you expect when placing an order and the price at which it is actually filled. It can work against you (negative slippage) or in your favour (positive slippage).

  • Stop order

    A stop order is an order to buy once the price rises to a set level (buy stop) or to sell once it falls to a set level (sell stop). When triggered, it typically becomes a market order.

  • Stop out

    A stop out is when the broker automatically closes your positions because your account no longer has enough equity to support them. It happens when the margin level reaches or falls below the broker’s stop-out level.

  • Volatility

    Volatility is how much and how quickly a currency pair’s price moves over a period. Higher volatility means larger price swings and, for the same position size, greater risk.

Frequently asked questions

What should I learn first about forex?

Start with how currency pairs are quoted, then pips and lots, which together tell you how much a price move is worth. Next learn leverage and margin, because they determine how much risk a trade carries.

Is forex trading suitable for beginners?

Forex is easy to access but hard to trade profitably. Most retail traders using leveraged products lose money, so beginners should learn the basics, practise on a demo account and use strict risk management before risking real money.

How much money do I need to start trading forex?

Many brokers accept small deposits, but the right amount depends on how much you can afford to lose and on sensible position sizing. Risking only a small percentage of your account per trade matters more than the starting amount.