Flip Growth Investment's Introduction to Forex
The foreign exchange (forex or FX) market is a global, decentralised marketplace where currencies are traded. According to the Bank for International Settlements, average daily turnover exceeds $7 trillion, making it by far the largest financial market in the world. It runs 24 hours a day, five days a week, across centres from Sydney and Tokyo to London and New York.
Currency pairs
Currencies are quoted in pairs, such as EUR/USD. The first is the base currency and the second the quote currency; the price shows how much of the quote currency buys one unit of the base.
Pips, spreads and lots
A pip is the smallest standard price move, usually 0.0001 for most pairs. The spread is the gap between the buy and sell price and is a key trading cost. Position sizes are measured in lots.
What moves exchange rates
- Central bank interest rate decisions
- Inflation, employment and GDP data
- Political events and geopolitical risk
- Trade balances and cross-border capital flows
Managing Forex Risk the Flip Growth Investment Way
Most retail forex trading uses leverage, which magnifies both gains and losses. Regulators in many jurisdictions require brokers to disclose the share of retail accounts that lose money, and those figures are frequently above 70%. A disciplined approach means using stop-loss orders, risking only a small percentage of capital on any trade and dealing only with brokers authorised by a recognised regulator.