Foreign Exchange
Currencies trade in the largest, most liquid market in the world, and this category covers it for investors rather than gamblers.
The explainers start with what forex is and how a quote reads, base versus quote currency, pips and pipettes, then move to the mechanics that decide profit and loss: lot sizes and position sizing, leverage and margin, the bid-ask spread, and the rollover that funds a carry trade.
Macro drivers, from central bank rates to capital flows, tie it together.
Investing With Purpose is blunt about the risk, since leverage cuts both ways and most retail forex accounts lose money.
Read this to understand how currencies actually trade and what it really costs to hold a position.
Forex, short for foreign exchange, is the global market where one currency is traded for another. It is the largest…
Every forex trade involves two currencies, written together as a pair such as EUR/USD or USD/JPY. Pairs are grouped…
An FX rate is a ratio between two currencies. The first currency in the pair is the base, the second is the quote, and…
A pip is the standard unit used to measure how much an exchange rate has moved. A pipette is one-tenth of a pip, the…
The bid-ask spread is the gap between the price at which you can sell a currency pair (the bid) and the price at which…
Forex trades around the clock, but not evenly. Activity moves through four main regional sessions, and liquidity rises…
Every country has to decide who sets the price of its currency. A fixed regime hands that job to the government, which…
A lot is the standardized quantity of currency you trade in one position. Position sizing is the discipline of choosing…
Leverage lets a forex trader control a large position with a small deposit. Margin is that deposit, the cash the broker…
Exchange rates move because the relative demand for two currencies changes. The main drivers are interest rates and…
A non-deliverable forward, or NDF, is a currency contract that settles in cash rather than by exchanging the two…
A forward exchange rate is not a forecast. It is arithmetic. The forward price of a currency pair is pinned to the spot…
When you buy foreign assets you buy two things at once: the asset and the currency it is priced in. A currency overlay…
Every trading day at 4pm London time, the currency market pauses on a single number. The WM/Reuters fix is the…
Triangular arbitrage turns a pricing inconsistency between three currencies into a risk-free profit. When the quoted…
An exchange rate regime is the rule a country adopts for how its currency's price is set against others. The choices…
Forward points are the number added to or subtracted from a spot exchange rate to get the forward rate. They are not a…
An FX fixing is a single reference exchange rate, published at a set time, that market participants use to value and…
When you hold a forex position overnight, you either earn or pay interest based on the rate difference between the two…