How the Forex Market Works
The forex market is decentralized. There is no single exchange like the New York Stock Exchange. Instead, currencies trade electronically between banks, brokers, institutions, and individual traders across a global network. This is called the interbank market.
Because participants span every time zone, the market stays open 24 hours a day, five days a week. Trading begins when the Sydney session opens on Sunday evening (US time) and runs continuously until the New York session closes on Friday evening.
The market operates in four major sessions: Sydney, Tokyo, London, and New York. The busiest hours happen when sessions overlap. The London-New York overlap (8:00 AM to 12:00 PM EST) typically sees the highest volume and the tightest spreads.
Daily volume exceeds $7.5 trillion, according to the Bank for International Settlements 2022 Triennial Survey. That is roughly 30 times more than all global stock markets combined. This massive volume means you can enter and exit positions quickly, even in large sizes, without moving the price much.
When you trade forex through a broker like LHFX, your orders are routed through STP/ECN execution. This means your trades go directly to the market without a dealing desk making decisions about your order.
Currency Pairs Explained
In forex, you always trade one currency against another. These are called currency pairs. The first currency is the base currency, and the second is the quote currency.
Take EUR/USD as an example. EUR is the base, USD is the quote. If EUR/USD is trading at 1.0850, it means 1 euro costs 1.0850 US dollars. When you "buy" EUR/USD, you are buying euros and selling dollars. When you "sell" EUR/USD, you are selling euros and buying dollars.
Major Pairs
Major pairs all include the US dollar on one side. They account for about 75% of all forex trading volume and have the tightest spreads.
Minor Pairs (Crosses)
Minor pairs do not include the US dollar. Examples include EUR/GBP, EUR/JPY, and GBP/JPY. They have slightly wider spreads than majors but still offer good liquidity.
Exotic Pairs
Exotic pairs combine a major currency with a currency from a smaller or emerging economy, like USD/TRY (US dollar vs Turkish lira) or EUR/ZAR (euro vs South African rand). These pairs have wider spreads, lower liquidity, and can be very volatile. They are generally not recommended for beginners.
How to Read a Forex Quote
Every forex quote has two prices: the bid and the ask.
The bid is the price at which you can sell. The ask is the price at which you can buy. The ask is always slightly higher than the bid.
EUR/USD: 1.0848 / 1.0850
The Spread
The difference between the bid and ask price is called the spread. In the example above, the spread is 0.0002, or 0.2 pips. The spread is a cost of trading. Tighter spreads mean lower costs. At LHFX, raw spreads start from 0.0 pipson major pairs, with a $3 per side commission per lot.
Tip: When comparing brokers, look at the total cost per trade (spread + commission), not just the spread alone. A broker advertising zero spreads but charging high commissions may cost more overall.
What Is a Pip?
A pip (percentage in point) is the smallest standard price move in a currency pair. For most pairs, a pip is the fourth decimal place (0.0001). So if EUR/USD moves from 1.0850 to 1.0860, it has moved 10 pips. For yen pairs like USD/JPY, a pip is the second decimal place (0.01). If USD/JPY moves from 150.00 to 150.10, that is 10 pips.
Pips, Lots, and Leverage
Lot Sizes
Forex trades are measured in lots. A lot determines the size of your trade and how much each pip is worth.
If you buy 1 standard lot of EUR/USD and the price moves up by 50 pips, you make $500 (50 pips x $10/pip). If it moves down by 50 pips, you lose $500. With a mini lot, the same move would be $50. With a micro lot, $5.
Leverage
Leverage lets you control a larger position with a smaller amount of money. With 1:100 leverage, a $1,000 deposit lets you control a $100,000 position (1 standard lot). LHFX offers leverage up to 1:500.
Here is a practical example: to open a 1 standard lot position on EUR/USD (worth $100,000) with 1:100 leverage, you need $1,000 in margin. With 1:500 leverage, you need just $200.
Leverage warning
Leverage amplifies both profits and losses. A 50-pip move against you on a 1 standard lot position is a $500 loss, regardless of how much margin you posted. Higher leverage does not change profit or loss amounts; it only changes how much margin is required. Always use stop-loss orders and never risk more than you can afford to lose.
For a full breakdown of how leverage and margin work, see our Leverage guide.
How to Place Your First Trade
Here is a step-by-step walkthrough using MetaTrader 5, the platform available at LHFX.
Open MetaTrader 5
Download MT5 from LHFX or use the web terminal. Log in with the credentials from your account dashboard.
Choose a currency pair
Open the Market Watch panel (Ctrl+M) and find EUR/USD. Double-click it to open a new order window. If you are a beginner, stick with major pairs.
Set your lot size
Start small. If your account is $500, consider 0.01 lots (micro lot). At $0.10 per pip, a 50-pip loss costs you $5, which is 1% of your account. That is responsible sizing.
Set a stop loss and take profit
Before clicking buy or sell, set your stop loss (the price where you exit if wrong) and take profit (the price where you take your gains). Never trade without a stop loss.
Click Buy or Sell
Click Buy if you think the price will go up. Click Sell if you think it will go down. Your position is now open and running in real time.
Monitor and close
Watch your trade in the Terminal panel (Ctrl+T). The position will close automatically if it hits your stop loss or take profit. You can also close it manually at any time by right-clicking the trade.
If this is your first time, we strongly recommend practicing on a demo account first. You get virtual funds and real market conditions, so there is zero risk while you learn.
Ready to Try?
Open a free demo account and practice everything you just learned. No deposit required, no time limit.
Why Trade Forex?
Massive liquidity
$7.5 trillion in daily volume means you can almost always find a buyer or seller. Slippage on major pairs is minimal, and you can enter and exit trades quickly.
Trade 24 hours a day, 5 days a week
Unlike stocks, forex does not close for lunch or end at 4 PM. You can trade around your schedule, whether that is early morning, late night, or during your lunch break.
Low barrier to entry
At LHFX, you can open an account with just $10. With micro lots (0.01), you can take meaningful positions even with a small balance. There is no minimum trade frequency.
Profit in rising or falling markets
Because you are always trading one currency against another, you can go long (buy) when you expect a currency to strengthen, or go short (sell) when you expect it to weaken. There are opportunities in both directions.
Accessible technology
MetaTrader 5 is available on desktop, web, and mobile. You get professional-grade charting, 80+ built-in indicators, 21 timeframes, and the ability to run automated trading strategies (Expert Advisors). See the full MT5 platform overview.
Risks of Forex Trading
Forex trading is not a guaranteed way to make money. It is important to understand the risks before you start.
Most retail traders lose money
Industry data consistently shows that between 70% and 80% of retail forex traders lose money. This is not because the market is rigged. It is because most people trade without a plan, use too much leverage, and let emotions drive their decisions.
Leverage multiplies losses
The same leverage that can amplify a $100 profit can amplify a $100 loss. With 1:500 leverage, a 0.2% move against your position wipes out your entire margin. This is why position sizing and stop losses are not optional; they are essential.
Gaps and slippage
Prices can gap over weekends or during high-impact news events. Your stop loss might execute at a worse price than expected. This is rare on major pairs during normal hours, but it happens.
Emotional pressure
Watching real money move up and down creates emotional pressure that most people underestimate. Fear and greed are the biggest enemies of consistent trading. A demo account helps, but it cannot fully simulate the psychology of real-money trading.
No guaranteed outcomes
No strategy works 100% of the time. Past performance does not predict future results. Anyone promising guaranteed returns in forex is not being honest with you.
Risk disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Only trade with capital you can afford to lose.