The forex market is the largest financial market and one of the most lucrative markets in the world. Many individuals, regardless of their experience, find it attractive as besides the profit and the size, it does not require its participants to be experts. Forex is one of the most accessible markets because its concept is very simple. The fact of exchanging one currency for another already means you are a part of the forex market.

The forex market, though simple and easy to understand, should not be underestimated. Despite simplicity, trading forex poses serious risks. To help anyone willing to take part in this dynamic market, here are some of its basic concepts.

8 major currencies

One of the main concepts on the forex market is that there are only eight major economies to keep close tabs on. Unlike the stock market where there are thousands of stocks to track, the forex market allows you to pay attention only to the following eight economies: Australia, Canada, the eurozone (Germany, France, Italy, and Spain), Japan, New Zealand, the United Kingdom, Switzerland, and the United States. The big eight are the economies that have the largest markets out of all the economies in the world.

Trading currencies

Trading currencies on the foreign exchange spot market involves a simultaneous purchase of one currency and the sale of another. The reason is that a currency’s value is always determined by its comparison to another currency. The effect of the simultaneous trade is that you use the revenue from the sold currency to buy the other currency. You should remember that every currency rate has interest rates imposed by the central bank of its country. This means you have to pay the interest rate when buying but at the same time you get it when selling.


Another good thing about the forex market is that it gives an opportunity for leverage. The leverage can be up to 100:1 meaning that you can use assets worth $100 having invested just $1. Thus, you are given the chance to make significant profits; however, you can suffer significant losses in case something goes wrong.

Interest rates

Interest rates are one of the most important concepts on Forex. Generally, interest rates depend on an economic situation. Countries that have robust economic growth and rising inflation set higher interest rates in order to control growth and curb inflation.

The forex market is exponentially growing as expansion of technology continues to shorten distance, thus making forex trading available to anyone who wants to manage their wealth. There are more concepts on the forex market and understanding them is crucial to succeed on the biggest and one of the world’s most lucrative markets.