Forex — short for foreign exchange — is the biggest market on the planet, trading trillions of dollars a day, and it works on one simple idea: you're always trading one currency against another. You never just "buy dollars" in a vacuum; you buy dollars by selling euros, or buy yen by selling pounds. That's why forex prices come in pairs. This lesson explains how pairs work, why forex runs almost around the clock, and how leverage shapes the way it's traded.
If stocks are about one company and futures are about one contract, forex is about the relationship between two economies.
Currency pairs: everything is relative
A forex price like EUR/USD = 1.10 means one euro costs 1.10 US dollars. If you think the euro will strengthen against the dollar, you buy the pair; if you think it'll weaken, you sell it. There's no single "price of the euro" — only its price relative to something else. The first currency is what you're buying or selling; the second is what you're pricing it in.
Because currencies are traded everywhere on Earth, forex follows the sun: as one financial center closes, another opens, so the market runs 24 hours a day, five days a week. The busiest, most tradeable moments are when two big sessions overlap. Here's the session map:
The full breakdown lives in forex trading sessions, and how session timing applies to every market is in time-of-day trading.
Leverage and the pip
Forex moves in tiny increments — a hundredth of a cent, called a pip. To make those tiny moves meaningful, forex is traded with heavy leverage (often much higher than stocks). That's a double-edged sword you'll recognize from Lesson 5: it turns small currency moves into real profit and loss, but it also means a small move against you hits hard.
Why forex sits where it does on the map
Forex is prized for its size, its nonstop hours, and its deep liquidity — you can almost always get in and out at a fair price. It's harder than it looks, though: currency moves are driven by interest rates, central banks, and global politics, which are notoriously tough to predict. For this course, forex teaches you two portable ideas: that price is always relative, and that session timing matters in every market. And once more the thread holds — you can trade currency direction with options too, keeping the leverage while defining the risk. Next we turn to a very different kind of asset: something real you can hold.
Related reading
- Forex Trading Sessions — the 24-hour currency day in detail
- Time-of-Day Trading — why timing matters in every market
- Session Clock — the master view of all sessions
- Options Moneyness & Leverage — capped-risk leverage
Next: Lesson 7 — Gold & commodities, real assets and the classic safe haven.