Forex trading – or FX for short – refers to stock trading on the foreign exchange market. This means trading in the different forms of currency that are in circulation around the world. As exotic and exciting as it sounds, it’s important to understand the basics before you jump in. There are a great many risks involved, but there are advantages as well.

Forex trades top 1.5 trillion every day. That is 100 times more trading than on the New York Stock Exchange or NYSE. The difference is that Forex trading is primarily speculative. Another difference is that rather than trading through a central exchange like the NYSE, Forex trading occurs on what is referred to as the interbank or over the counter (OTC) market. This means that trades are made directly between the buyer and seller by phone or through an online network. Yet another difference is that Forex trading happens 24 hours a day, seven days a week with centers in major cities like Sydney, Australia; London, England; New York City, United States; Tokyo, Japan and more.

The most common trade that occurs in Forex trading is called a currency trade. A currency trade is a trade in which one currency is sold and another is purchased at the same time. The two types of currencies together are referred to as a cross. The most popular currency trades are majors and these include USDJPY, USDCHF, EURUSD, and the GBPUSD.

Forex trading is much different than trading on the NYSE, Dow, or S&P 500. Make sure you understand the market thoroughly before you risk any major cash.