Forex trading also known as foreign exchange or FX trading is the conversion of one currency into another with the aim of making a profit. It works by trying to capitalize on the constant fluctuations in the value of currencies.

Currency trading always takes place in pairs.

In the forex market, currencies are traded in pairs, like EUR/USD or USD/JPY, where the first currency in the pair is the "base currency" and the second is the "quote currency"..

The exchange rate between two currencies tells you how much of one currency is needed to buy the other. For example, if the EUR/USD exchange rate is 1.20, this means 1 Euro can buy 1.20 US Dollars.

Buy and sell

You can buy or sell a currency pair based on whether you think the base currency will strengthen (increase in value) or weaken (decrease in value) against the quote currency.

Pip

A pip is a measure to express the change in the value of a currency pair. It's the smallest price movement that can occur in the forex market.

Profit or loss

When you close your forex trade, the difference between the original exchange rate and the closing exchange rate determines your profit or loss.