Foreign exchange, usually shortened to forex or FX, is the market where one currency is exchanged for another. Exchange rates move as market participants respond to economic data, interest-rate expectations, trade, investment flows, politics and changing risk appetite.
How a currency pair works
A pair such as EUR/USD compares the euro with the U.S. dollar. The first currency is the base currency and the second is the quote currency. A quoted price indicates how many units of the quote currency are needed for one unit of the base currency. Prices can move in either direction; a pair name alone does not tell you whether a trade is suitable.
Bid, ask and spread
The bid is the price at which a provider may buy a currency pair, while the ask is the price at which it may sell it. The difference is the spread. Spreads and other trading costs vary by provider, account type, currency pair, market liquidity and conditions. Commissions, swaps, slippage and platform charges can also affect a result.
Spot, rolling products and derivatives
Retail traders often encounter leveraged products such as contracts for difference or rolling spot forex rather than taking delivery of currency. The contract, protections and risks depend on the product and jurisdiction. Read the provider’s legal documents and understand how margin, overnight financing and forced close-out work before trading.
Start with questions, not predictions
- What exact product am I trading?
- What fees and financing costs apply?
- How much could I lose if price moves sharply?
- Is the provider authorised for the activity in my location?
This guide explains general terms only. It is not a forecast, a trading signal or a recommendation to buy or sell a currency.
Reviewed October 21, 2026 · Full risk disclosure