Foreign exchange

Forex markets

Understand how currencies trade, what moves exchange rates, how leverage and spreads work, and what to compare when choosing a forex platform.

Written by WiT Markets EditorialReview Editorially reviewedLast reviewed

Market
Global decentralised currency market
Pairs
Currencies trade in pairs
Pricing
Quoted as bid / ask
Costs
Spread, commission, financing and FX-related charges may apply
Risk
Leverage can magnify losses as well as gains
Product
Retail access is often a CFD, rolling spot or another broker-specific contract

What forex is

Foreign exchange is the market for one currency against another. An exchange rate is the price of the base currency in units of the quote currency. There is no single central exchange that prints one official rate, in the way a stock exchange prints a trade in a share.

The institutional market is over the counter. Banks, funds and companies deal with each other, and with dealers, from Monday to Friday. That network is often called the interbank market. A retail app is not a seat in it. The price on the app is the price that broker is willing to show you.

Liquidity is how easily a size can be dealt without moving the rate. It is deepest in a few pairs, during the hours when more than one region is active, and it thins before data, on holidays and over the weekend.

The words on a quote

  • Base currencyThe first currency in the pair. It is the one being priced.
  • Quote currencyThe second currency. The rate is how many units of it buy one unit of the base.
  • BidThe price at which you can sell the base currency to the quoting firm.
  • AskThe price at which you can buy the base currency from the quoting firm.
  • SpreadThe gap between bid and ask. It is a cost on the round trip.
  • OTCDealing with a counterparty, rather than sending an order to one central exchange.

Currency pairs

Pairs are grouped by how widely they trade. The labels are market convention. They are not a quality score, and none of the figures below is a live quote.

Majors

EUR/USD, GBP/USD, USD/JPY, USD/CHF

The most traded pairs. Liquidity is usually deepest here, and spreads are usually tighter than in thinner pairs. That is a description of the market, not a prediction.

Minors / crosses

EUR/GBP, EUR/JPY, GBP/JPY

A cross does not use the US dollar as one side. Liquidity is still real, and the spread is often wider than in the majors.

Exotics

A major currency and a smaller or emerging-market currency

These books are thinner. Spreads widen faster, and a political or capital-flow shock can move the rate further than a major pair.

Illustrative example — not a live quote

EUR/USD = 1.1000

EUR is the base currency. USD is the quote currency. In this illustration, €1 is priced at $1.10. A rise in the quote means the euro buys more dollars. A fall means it buys fewer. The number is a teaching figure. It is not the market.

What moves exchange rates

An exchange rate is a relative price. It moves because the balance of expected returns, risk and the need to transact has changed between two currencies.

Macro drivers

  • Interest rates and the path markets expect after the next meetings.
  • Central-bank decisions, guidance and balance-sheet policy.
  • Inflation, growth and labour-market data.
  • Fiscal policy, government borrowing and trade flows.

Market drivers

  • Risk sentiment and cross-border capital flows.
  • Positioning that has to be reduced when the narrative changes.
  • Liquidity at that hour, including holidays.
  • Geopolitics, commodity exposure and demand for currencies treated as a refuge.

WiT View

Exchange rates are relative prices. Strong domestic data does not automatically make a currency rise if the market had already expected something stronger.

Central banks

The institutions below set, or heavily influence, the policy rate in their currency. WiT Markets does not forecast their decisions.

Federal Reserve

Policy rate and guidance for the US dollar, which is one side of most heavily traded pairs.

European Central Bank

Policy for the euro. Several national central banks sit inside that system.

Bank of England

Policy for sterling. The rate decision and the path in the statement can matter as much as each other.

Bank of Japan

Policy for the yen. Yield differences versus other currencies are a standing part of yen pricing.

Swiss National Bank

Policy for the franc, including periods when the bank has acted in the currency market itself.

Reserve Bank of Australia

Policy for the Australian dollar, a currency that also responds to commodity and China-linked news.

  • Policy rateThe short-term rate the bank steers. Markets trade the expected path, not only today’s setting.
  • Forward guidanceWhat the bank says about the conditions that would change the path.
  • Quantitative easing or tighteningBuying or letting mature a portfolio of assets. It changes the amount of liquidity, and it is not a promise about the currency.
  • InterventionBuying or selling the currency to affect the rate. It happens. It does not have a guaranteed result.

Trading hours

Major pairs can be quoted through the weekday, because dealing follows the sun from Asia-Pacific to Europe to North America. That is a long week, not a crypto clock that runs through Saturday and Sunday.

Liquidity is usually deeper when two sessions overlap. It is thinner at the handover, before a major release, and on local holidays. The market then shuts for the weekend. A position held across that close cannot be exited until dealing resumes, and the reopen can gap.

Rollover is the point at which an open leveraged position picks up a financing adjustment. The exact clock time depends on the broker and the time zone. This page does not publish a session timetable, because a time without a zone is a false precision.

  • Asia-PacificThe first major block of the weekday, with yen, Australian dollar and regional Asian currencies most active.
  • EuropeLondon hours concentrate a large share of dealing, including the European currencies.
  • North AmericaNew York hours overlap with Europe, and US data falls in this block.
  • Weekend and holidaysThe book closes, then reopens. Holiday liquidity can look like a normal day and behave like a thin one.

Pips, spreads and size

Pips

A pip is the usual minimum step people use when they talk about a currency move. In most pairs that step is 0.0001. In pairs quoted in yen it is usually 0.01. A pipette, or fractional pip, is a tenth of that step. Some platforms show it as an extra digit.

Pip value is how much money one pip is worth on a given size. It depends on the position and on which currency the account uses. It is not a property of the pair alone.

Illustrative example — not a live quote

EUR/USD moves from 1.1000 to 1.1001. That is one pip in this illustration. On a hypothetical 10,000-unit position, one pip is 1 unit of the quote currency, which here is $1. Change the size or the pair and the money amount changes.

Spreads

The bid is the sell price. The ask is the buy price. The spread is the difference. You buy at the higher price and sell at the lower one, so the spread is paid to enter and leave.

  • Fixed spreadA gap the firm keeps stable for a period. It can still be changed, and it can be withdrawn in a disorderly market.
  • Variable spreadA gap that widens and tightens with liquidity. The calm-hour number is not the news-hour number.
  • Raw spread plus commissionA tighter quoted gap, plus a separate commission. A “0.0 pip” headline does not mean the trade is free.

Lot size

A standard lot is conventionally 100,000 units of the base currency. A mini lot is 10,000. A micro lot is 1,000. A broker can offer other sizes. The notional is the amount of currency the position controls. A small cash deposit does not make that notional small. This is a definition, not a suggestion to use the larger size.

Leverage and margin

Leverage means the position’s notional is larger than the cash set aside for it. Margin is that cash. Initial margin is what the firm requires to open. Maintenance margin is what it requires to keep the position open. A margin call is a demand for more cash, or a warning that the firm may close the position. Liquidation is the close the firm makes when the margin is no longer enough.

Illustrative example — not an offer and not a live rate

Suppose a firm required 5% margin. £1,000 of margin would control £20,000 of currency. A 1% move against that position is £200, which is 20% of the cash posted. A 5% move against it uses the whole £1,000. The 5% figure is a teaching assumption. Real margin rates are set by the entity and the regulator, and they change.

Leverage risk

A small market move can create a large gain or a large loss relative to the cash deposited. Leverage is not a benefit that can be described on its own. The same multiple that magnifies a favourable move magnifies an unfavourable one, and the unfavourable one can arrive first.

Negative balance protection

This is a rule that stops a retail client’s account from going below zero, so a gap cannot leave a debt to the broker. Some regulators require it for retail CFD clients. It is not a feature of every firm, every entity or every professional account. A brand that offers it in one country can withhold it in another.

Stop-loss and guaranteed stops

A stop-loss is an order to close if the rate reaches a stated level. In a fast move or a gap, the fill can be worse than that level. A guaranteed stop, where a firm offers one, is a contract to fill at the stated price, usually in exchange for a premium. It does not remove the loss down to that price, and it does not exist on every account.

What forex actually costs

The headline spread is one line on a longer bill. Provider-specific numbers are omitted here because pricing in the research file is still open and changes by entity.

Spread

The bid-ask gap. It is paid in the price, so it may not appear as a separate fee.

Commission

A per-trade charge on raw or tiered accounts. It belongs next to the spread, not instead of a reading of the spread.

Overnight financing

The swap or rollover for holding a leveraged position past the firm’s cut-off. It can be a charge or a credit.

Rollover convention

Some weekdays carry a multi-day adjustment, often to cover the weekend. The weekday is a broker convention, not a law of the pair.

Currency conversion

The cost of moving the result into the currency of the account, or of funding the account in a different currency.

Other charges

Platform or data fees, a premium for a guaranteed stop, and inactivity or withdrawal fees, where the agreement includes them.

Swaps and rollover

A position kept open overnight is financed. The adjustment reflects the interest-rate gap between the two currencies, plus the firm’s own charge. One side of the pair can earn a credit while the other pays. A credit is not a reason to hold the position. Triple-style adjustments exist at some firms on one weekday. Do not assume the weekday or the formula is the same everywhere.

Swap-free accounts

Some firms offer an account that does not post a swap, often described as Islamic or swap-free. Eligibility depends on the entity, the client and sometimes the instruments. The firm may replace the swap with an administration fee, a wider spread, or a limit on how long a position can be held. Two “swap-free” accounts are not the same product.

How the products differ

The pair can be the same and the legal position completely different. Read the contract type before the platform logo.

Six ways a currency exposure can be packaged. Not a menu of recommendations.
ProductWhat you holdWhat to keep separate
Spot FXA near-term exchange of one currency for another.Companies and banks use spot to convert money. A retail “rolling spot” ticket may never deliver the currency into a bank account.
Forex CFDA derivative contract with the broker.You gain or lose on the rate. You do not take delivery of the foreign currency. The broker is the counterparty.
Spread bettingA UK and Ireland structure, where a firm offers it.The stake is on the move in the rate. It is still a leveraged contract with the firm. It is not available as a global product.
FX futuresAn exchange-traded contract.The exchange and the clearing house sit between the two sides. The contract has an expiry. It is not the same object as a broker CFD.
FX optionsThe right, not the obligation, to exchange at a stated rate.A buyer can lose the premium. A seller can lose more. An option on a currency is not a spot conversion.
ForwardsAn agreed rate for a later settlement.Companies use forwards to lock a commercial payment. A forward is not a rolling CFD, even when both refer to the same pair.

Cash currency

Buying dollars for a trip, or converting a dividend, is a spot conversion. You end up with the currency. The cost is the spread or commission on that exchange. There is no leverage and no overnight financing on a simple conversion.

Leveraged CFD

Opening a EUR/USD CFD does not put euros or dollars in a travel wallet. It is a contract with the broker on the future path of the rate. The position is margined, financed if you hold it, and closed out for a gain or a loss. The two decisions share a quote and almost nothing else.

Understanding forex risk

  • 01Leverage makes a small rate move a large result against the cash deposited.
  • 02Margin is the cash that keeps the position open. It can be used up.
  • 03Liquidation is the firm closing the position when margin is not enough.
  • 04Negative-balance protection is a local rule, not a global feature.
  • 05Volatility and gaps happen while the position is open, including over the weekend.
  • 06The regulator that matters is the one that authorises the entity on the contract.

Leverage

A small rate move is a large result against the cash you posted.

Volatility

Scheduled data and surprise events can reprice a pair in seconds.

Gap risk

The weekend and some holidays close the market. It can reopen at a different rate.

Liquidity

A thin book widens the spread. The quote you see can be the cost.

Counterparty

On a CFD, the broker is the other side of the contract.

Execution

An order can be rejected, delayed or filled in parts.

Slippage

The fill can be worse than the price on the ticket, especially in a fast move.

Interest-rate risk

The financing adjustment changes when rate expectations change.

Political risk

Elections, sanctions and capital controls move some currencies more than others.

Emerging-market risk

A thinner currency can gap, and converting out of it can be restricted.

Platform failure

An outage arrives at the moment you wanted to change the position.

Regulatory and entity risk

The brand on the advertisement may not be the firm that holds the account.

Unregulated firms and common traps

A genuine firm can still offer a product that loses money. A fraudulent one is a different problem. None of the following is an accusation against a named provider. It is a list of patterns regulators and investors keep meeting.

Clone firms

A website copies a real firm’s name and registration number. The register entry is real. The website is not.

Offshore shells

An entity in a place with thin oversight is presented as if it had a major-market licence.

Guaranteed-return claims

A currency market cannot honestly promise a return. That sentence is the warning.

Signal selling

A paid feed of entries is not a regulated portfolio service, and the seller does not share the loss.

Pressure to deposit

Urgency, bonuses that are hard to withdraw, and staff who discourage a withdrawal.

Narrow funding

A firm that will only take a crypto deposit, or will only pay a withdrawal in a form you cannot easily use.

Impersonation

Social-media accounts and messaging apps pretending to be a dealer, a bank or a regulator.

Withdrawal obstruction

New fees, new documents or a vanished support desk once a withdrawal is requested.

How to verify a forex broker

Check the legal entity against the regulator’s own register. A logo on a homepage is not a registration.

  1. Identify the legal entityThe company name on the client agreement, not the marketing brand.
  2. Find the regulatorThe authority that firm claims, named in full.
  3. Confirm the registrationSearch the regulator’s register. Match the number and the legal name.
  4. Confirm country eligibilityAsk whether that entity can onboard a resident of your country.
  5. Check the productSpot, CFD, spread bet, future or option. Write down which one the account would hold.
  6. Check leverage rulesThe retail limit for that entity. A global page can show a multiple you will never be offered, or should not want.
  7. Check negative-balance protectionWhether it applies to retail clients of that entity, and whether your classification removes it.
  8. Check withdrawal termsMethods, delays and fees, from the agreement rather than from a chat.
  9. Check pricingSpread, commission and financing on the account type you would actually open.
  10. Check the complaint processThe firm’s process, and the ombudsman or compensation scheme that entity belongs to, if any.

Once you understand the product and the risk, the next question is which platform provides the access and the controls you need.

Choosing a forex broker

Regulation

Which legal entity would serve you, and which regulator authorises that entity?

Forex product

Spot, CFD, spread bet, future or option? The name of the pair does not answer this.

Pair range

Majors, minors and exotics are different books. A long list is not a reason to trade the thin ones.

Pricing

Spread-only, raw plus commission, or a tier. The model matters more than a headline pip.

Platform

A proprietary app, MT4, MT5, cTrader or TradingView. The software is not the contract.

Execution

How orders are handled, and what the firm says happens when the market is fast.

Automation

APIs, expert advisors and cBots, only if you intended to automate. A connector is not an edge.

Leverage

Retail limits are set by the entity and the regulator. A higher multiple is a larger loss as well.

Protection

Negative-balance rules and client-money rules, read from that entity’s disclosures.

Swap-free

Where it is relevant. Eligibility, substitute fees and restricted instruments vary.

Country availability

Can that legal entity onboard a resident of your country? A global website is not a yes.

Forex trading platforms

Providers listed for comparison. Product structure, leverage, pricing and legal entity vary by country and may change.

A named comparison of forex platforms has been written and is held for legal review. It is not part of this public page. The questions above are the part that does not depend on a provider’s current tariff.

Forex tools

These calculators use numbers you type. They do not fetch a live rate. A pip-value calculator and a standalone margin calculator are not published as separate tools.

Position size

Turn a stated risk and a stated stop distance into a size. It does not choose the trade.

Risk and reward

Compare a stated downside with a stated upside. It does not predict either.

Pip value

Pip value and size from a conversion you type. No rate is fetched.

Economic calendar

The scheduled releases that markets already know are coming. The direction is not owed.

Related reading

What is leverage?

How posted margin controls a larger notional, and what that does to a loss.

How margin works

Initial margin, maintenance margin, and what a margin call is asking for.

What is a pip?

The usual unit of a currency quote, and why a pipette is a smaller step.

How spreads work

The gap between the bid and the ask, and why a zero headline can still have a commission.

Central banks

Policy rates and guidance as inputs to a currency, not as a forecast.

Currency conversion

Why changing money for a payment is a different decision from a leveraged pair.

Questions readers ask

What is forex?

Forex is the market for exchanging one currency for another. Most wholesale dealing happens between banks, funds and companies, off a single central exchange. A retail app usually shows a contract with a broker, not a seat in that wholesale market.

What is a currency pair?

A pair is the price of a base currency in units of a quote currency. In EUR/USD, the euro is the base and the dollar is the quote. The rate says how many units of the quote currency buy one unit of the base.

What is a pip?

A pip is the usual step used to describe a currency move. In most pairs it is 0.0001. In pairs quoted in yen it is usually 0.01. A pipette is a tenth of a pip. The money value of one pip depends on the position size.

What is the spread?

The spread is the gap between the bid, where you can sell, and the ask, where you can buy. It is a cost. A variable spread changes with liquidity. A raw spread can look very small and still sit next to a commission.

What is leverage?

Leverage means the position controls more currency than the cash set aside as margin. The same multiple that enlarges a gain enlarges a loss. A retail limit set by a regulator is a cap, not a statement that the product is suitable.

What is margin?

Margin is the cash a firm requires against a leveraged position. Initial margin opens it. Maintenance margin keeps it open. If the cash is no longer enough, the firm can ask for more or close the position.

What is a forex CFD?

A contract for difference pays the change in the rate. You do not take delivery of the foreign currency. The broker is the counterparty. Financing usually applies if the position is held overnight.

Can forex losses exceed my deposit?

They can, where the account has no negative-balance protection. Some regulators require that protection for retail CFD clients. It is not universal, and a professional classification can remove it. Confirm the rule for the entity on the contract.

What is negative balance protection?

It is a rule that stops a retail account from going below zero after a gap or a fast move. Where it applies, the loss is limited to the money in the account. Where it does not apply, a debt to the firm is possible.

What is a swap?

A swap, or rollover, is the financing adjustment for holding a leveraged position past the firm’s cut-off. It can be a charge or a credit, and it reflects the interest-rate gap plus the firm’s own charge. It is not income to collect.

What is a swap-free account?

Some firms offer an account that does not post a swap, often for clients who cannot receive or pay interest. Eligibility varies. The firm may use a wider spread, an administration fee, or a limit on how long a trade can be held instead.

Is forex traded 24 hours?

Major pairs can be quoted through the weekday, following Asia-Pacific, European and North American hours. The market shuts for the weekend. Liquidity is not equal at every hour, and a position held over the close can gap when dealing resumes.

How do I check if a forex broker is regulated?

Read the legal entity on the client agreement, then search that name and reference number on the regulator’s own register. A logo, a licence claimed on a homepage, or a social-media profile is not the check.

How do I compare forex brokers?

Compare the product type, the legal entity, the pricing model, the platforms, the leverage rule and whether that entity can onboard you. Alphabetical order on this site is not a ranking. A lower advertised spread is not automatically a lower total cost.

What is the difference between MT4 and MT5?

Both are MetaTrader platforms used for orders, charts and automated strategies. MT5 is the later platform and supports a broader set of order and instrument types. A firm can offer one, both, or neither. The platform does not change whether the contract is a CFD.

What is cTrader?

cTrader is a trading platform some brokers offer for orders, charts and automated strategies called cBots. It is an alternative to MetaTrader at those firms. Access to the software is not a statement about spreads or about which legal entity holds the account.

What does TradingView integration mean?

It can mean placing orders from TradingView, or only viewing charts. Those are different. A chart integration does not change the contract, the entity, or the cost of the trade.

How this page was checked

Central banks and market structure

The description of the wholesale market points at the Bank for International Settlements. Policy institutions linked from this page are the Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan, the Swiss National Bank and the Reserve Bank of Australia.

Regulators

Retail product rules are a local matter. The page points at the FCA, ESMA, ASIC, the SEC, the CFTC and the NFA as the places to start a register check, not as a statement that any firm is approved.

Provider documents

Platform notes were read from provider pages on 14 October 2026. Spreads, commissions, minimums, leverage ratios and the country-by-country sheet are not published from that reading. Commercial fields were not used to order or describe anyone.

Sources and review

Written by: WiT Markets Editorial. Writes and structures WiT Markets pages. Separates a sourced fact from a cell that is Not confirmed.

Review: Editorially reviewed. This is not a qualified specialist review and it is not a legal sign-off.

Last reviewed: . Next review due . The date is an editorial pass. It is not a live check of every third-party fee.

Regulatory and official sources

Other sources

Methodology. Editorial policy. Corrections. Report an error.

Forex markets: how currencies trade and what to compare | WiT Markets