Introduction: Welcome to the World’s Largest Market
Welcome to the world of foreign exchange, or “forex.” If you’ve ever traveled to another country and exchanged your home currency for the local one, you’ve already participated in this market. The forex market is the global marketplace where national currencies are traded. It is, by a massive margin, the largest financial market in the world.
To put its scale into perspective, consider its daily trading volume, which has seen significant recent growth, representing a 28% increase from $7.5 trillion in 2022.
Daily Trading Volume: $9.6 trillion (as of April 2025)
This vast, decentralized market has no central physical location. Instead, it operates through a global electronic network of banks, corporations, and individuals. This structure allows it to run 24 hours a day, five days a week. Let’s meet the various participants who trade in this incredible market.
1. The Major Players: Who Trades Forex?
The forex market is composed of two primary groups of participants, differing vastly in their scale and objectives.
- Institutional Giants (94.5% of Volume): This group is the dominant force in the market. It includes central banks managing national reserves, commercial banks facilitating international trade for their clients, massive hedge funds, and large corporations hedging against currency risk. Their activities are essential for the functioning of the global economy.
- Individual Retail Traders (5.5% of Volume): This group is made up of an estimated 15 million individuals around the world who trade their own money. Their primary goal is to speculate on the short-term fluctuations in currency values, seeking to profit from these changes.
The difference in trading volume between these two groups is stark, as illustrated below.
| Market Participant Group | Share of Trading Volume |
| Institutional Traders | 94.5% |
| Retail Traders | 5.5% |
The global nature of these players is what allows the market to operate around the clock.
2. The Market That Never Sleeps: When Can You Trade?
One of the most unique features of the forex market is its 24-hour, 5-day-a-week operation. It follows the sun around the globe, opening on Sunday evening and closing on Friday afternoon. This continuous trading is made possible by four major, overlapping trading sessions.
- Sydney Session
- Tokyo Session
- London Session
- New York Session
For a new trader, it’s essential to understand that the market’s activity, meaning its liquidity and volatility, is not constant. Activity peaks when trading sessions overlap, as more participants are buying and selling. The London Session has the highest volume on its own, and when it overlaps with the New York open, it creates the most significant period of activity. This London-New York overlap is widely considered the busiest and most active period of the trading day. Now that we know when to trade, let’s look at what is traded.
3. The Building Blocks: How Forex Trading Works
At its core, forex trading involves the simultaneous buying of one currency and the selling of another. This is why currencies are always quoted in pairs.
3.1. Understanding Currency Pairs
A currency pair shows how much of the second currency (the quote currency) is needed to purchase one unit of the first currency (the base currency). For example, a quote of “EUR/USD = 1.19040” means 1 euro is worth 1.19040 U.S. dollars.
In this global market, one currency reigns supreme: the U.S. Dollar. It is involved in an overwhelming 89.2% of all forex transactions. The table below shows the top four most-traded currencies and their share of the market.
| Currency | Market Share |
| U.S. Dollar (USD) | 89.2% |
| Euro (EUR) | 28.9% |
| Japanese Yen (JPY) | 16.8% |
| British Pound (GBP) | 10.2% |
Given the dominance of the Euro and the U.S. Dollar, it’s no surprise that the most traded currency pair in the world is the EUR/USD, which accounts for approximately 21.2% of global daily turnover.
3.2. A Double-Edged Sword: What is Leverage?
Leverage is a tool that allows traders to control a large currency position with a small amount of their own capital. It is one of the most critical concepts for a beginner to understand because it is a powerful tool that amplifies everything—both potential profits and, more importantly, potential losses.
It is impossible to overstate the importance of this concept. According to market analysis, the misuse of high leverage is the primary cause of retail account blowouts, where traders lose their entire capital. The following example illustrates how quickly this can happen:
“With 1:100 leverage and $1,000 capital, a trader can control a $100,000 position. A 1% adverse move results in a $1,000 loss (100% of capital).”
Understanding these fundamental concepts is the first step on a long but fascinating journey.
4. Your First Steps in a Global Market
In this guide, we’ve explored the foundational concepts of forex. You’ve learned what it is (the world’s largest market), who trades in it (dominant institutions and a small segment of individuals), when it operates (24 hours a day, 5 days a week), and the basic mechanics of currency pairs and leverage.
This article is just the beginning of the learning journey. It’s crucial to approach this market with respect for its complexity, as the vast majority of retail traders (70-80%) lose money. Long-term success is not achieved overnight; it requires “consistent learning and practice,” a process that requires typically 4+ years of consistent learning and practice.
