Forex stands for FOReign EXchange and is a 24/5 global market where world currencies are traded against each other. It is the largest financial market in the world, with key centers in London, New York, Tokyo, and Sydney.

A currency pair, also known as an exchange rate, is a quotation of two different currencies (e.g., EURUSD). The first currency listed (e.g., EUR) is called the base currency, while the second currency (e.g., USD) is called the quote currency.

The most liquid pairs in the Foreign Exchange market are:

■ EURUSD, GBPUSD, USDJPY, USDCAD, AUDUSD, EURGBP, EURJPY, and NZDUSD

ECN stands for Electronic Communication Network, which is an electronic bridge connecting large liquidity providers (such as banks) with smaller market participants (like retail traders). This connection is facilitated through an ECN Forex broker, who charges trading commissions for providing access to the ECN market.

STP means Straight-Through Processing and refers to the method of transferring retail trading orders directly to liquidity providers without any dealing desk intervention. STP Forex brokers typically offer transaction speeds between 70 and 150 milliseconds.

■ NDD Brokers: These include ECN and STP brokers, providing direct access to interbank rates. This means traders receive better quotations and faster order execution.

■ DD Brokers: Known as Market Makers, they create an internal market that mimics the ECN market. They are generally not recommended for intraday Forex traders.

Money management aims to protect portfolios by helping investors decide how much to risk on each trade relative to their total available capital.

In practice, this involves applying various techniques and following a set of rules to limit risk while maximizing potential reward.

» Learn more about Money Management

Online Forex operates as a decentralized network for exchanging the world’s currencies. Trading in the online Foreign Exchange market requires a trading platform linked to a trading account. Forex brokers provide trading accounts, while most trading platforms are free to download and use.

■ Web-based trading platforms: better suited for beginners
■ MetaTrader and cTrader: preferred by advanced and professional Forex traders

Where to Start?

First, find a safe and competitive Online Forex broker. Then, open a Demo Account with the broker to practice without risking real money. Once you gain experience, you can move to a Mini-lot account where 0.01 lot equals $10. After some time, you may upgrade to a standard-lot account where 0.01 lot equals $1,000.

» Compare Online Forex Brokers