What is Forex?

Forex trading might sound complicated at first, but it’s something we interact with daily without realizing it. If you’ve ever traveled abroad and exchanged your local currency for another, you’ve already been a part of the forex market.

Forex, short for foreign exchange, is simply the process of buying and selling currencies to meet various needs.

What makes forex even more intriguing is that it’s not just for big banks or investors—every day, ordinary people like you are taking part in this massive, 24-hour market to make money. (And if you’re reading this, you’re probably wondering how you can get involved too). So let’s get started with the article.?

Why Does Forex Exist?

Forex exists because currencies are necessary for so many things we do, like traveling, trading, and running businesses. Without it, people and companies wouldn’t be able to pay for goods or services across borders.

Let’s say you’re in Nigeria and you want to order a product from the U.S. The seller doesn’t accept naira—they want dollars. This is where forex comes in: converting your naira to dollars so the transaction can happen. It’s the same thing when a Nigerian business imports cars from Japan; they’ll need to pay in yen. Forex makes this possible by connecting currencies around the world.

Even travelers depend on forex. If you’re flying from Lagos to London, you’ll exchange naira for pounds to pay for things when you land. And for investors? Forex is a way to profit from changes in currency values.

The Forex Market: A Global Network

The forex market is the world’s busiest digital marketplace. Every day, over $6 trillion flows through it, connecting people and businesses from Lagos to London, New York to Tokyo. Unlike the stock market, there’s no physical trading floor. Everything happens online, through a network that never sleeps.

The unique thing about the forex market is that it runs 24 hours a day, five days a week (Yes 5, not 7! The market is open Monday to Friday, but it closes on weekends). Let’s say you’re in Lagos and it’s 10 p.m.—the market is still alive because somewhere in the world, like New York or Sydney, traders are active. This means you’re not limited to “banking hours” or a fixed schedule. So it doesn’t matter if you’re an early riser or a night owl, there’s always an opportunity to trade.

How Does Forex Trading Work

When you trade forex, like I said before, you’re buying one currency and selling another at the same time. It’s at this point you’ll hear about currency pairs. Currency pairs are how currencies are quoted in forex trading. Each pair consists of two currencies: the first one is the base currency, and the second is the quote currency. The price tells you how much of the quote currency you need to buy one unit of the base currency. For example, when you trade the EUR/USD pair, you’re trading Euros (EUR) for U.S. Dollars (USD).

Here’s how it works:

• EUR/USD is the pair, and the first currency (EUR) is the base currency.
• The second one (USD) is the quote currency.

In forex trading, “quoted” refers to the way the price of one currency is expressed in terms of another. When you see a currency pair like EUR/USD, the quote shows how much of the second currency (in this case, the U.S. Dollar) is needed to buy one unit of the first currency (the Euro). So, if the EUR/USD is quoted at 1.10, it means you need 1.10 U.S. Dollars to buy 1 Euro.

So, if the EUR/USD price is 1.10, it means 1 Euro is worth 1.10 U.S. Dollars. If you were to buy this pair, you’re saying, “I believe the Euro will go up in value compared to the Dollar.” If it does, you can sell the Euros for a profit, since they’re now worth more in dollars.

For example, you buy EUR/USD at 1.10, and the price later rises to 1.12. That means your Euros are worth more than when you bought them. You could now sell your Euros at that higher price, making a profit.

But if you’re wrong and the Euro drops in value, then the opposite happens. You lose money, and that’s the risk in forex trading.

It might sound a little confusing at first, but once you understand how currencies are always in motion, it’s easier to see how forex can fit into your strategy for financial growth.

Why Do Currency Prices Change?

Currency values don’t stay the same—they’re always moving up or down. This constant shift is what creates opportunities in forex trading. But why do these changes happen? Let’s talk about it:

1. Supply and Demand: Supply and demand explain how the availability of something and the desire for it affect its price. When more people want something (high demand) but there’s not enough of it (low supply), the price goes up. On the other hand, if there’s too much of it (high supply) and not many people want it (low demand), the price goes down.

And just like anything else, when more people want a currency, its value increases. For example, if more businesses and travelers need U.S. Dollars, the dollar’s value will rise. On the other hand, if fewer people want it, the value drops.

1. Economic News: Big events, like elections, natural disasters, or announcements about interest rates, can shake up a country’s economy. These events directly affect how strong or weak a currency becomes. For example, In January 2025, the U.S. dollar weakened against the Japanese yen, reaching a near one-month low at 155.2 yen. This movement was influenced by softer-than-expected U.S. economic data and growing confidence in a Bank of Japan interest-rate hike. Also, market expectations for the Federal Reserve to implement rate cuts this year were influenced by softer consumer price data and anticipation of President Donald Trump’s policies upon his return to the White House.
2. Global Trade: Countries that export a lot tend to have stronger currencies. Why? Because foreign buyers need their currency to pay for goods. For example, if Nigeria is exporting a lot of oil, more people will need Naira, which could boost its value.

Benefits of Learning Forex

If you’re thinking about getting into forex trading, the good news is: it’s accessible, affordable, and filled with opportunities.

1. Accessibility: You can trade forex on your own from anywhere, anytime, as long as you have a smartphone or a computer with internet access. There are plenty of trading apps that make it easy for beginners to get into forex trading without needing to be in a specific place or use expensive equipment.
2. Low Starting Cost: This means that you don’t need a huge amount of money to start trading forex. Many brokers allow you to start with as little as $100, which is great for beginners who want to see how it works without committing a lot of capital upfront.

So, instead of needing thousands of dollars, you can start small, learn the basics, and gradually build your skills and confidence. This makes forex trading accessible for a wider range of people, even if you’re just getting started with limited funds. Of course, as you gain experience, you can choose to invest more, but the low entry point is definitely one of the appealing aspects of forex trading.

Brokers are companies or platforms that act as intermediaries between you (the trader) and the forex market. They provide the tools and resources you need to trade currencies. They offer trading platforms, like MetaTrader 4 or 5, where you can buy and sell currency pairs. Brokers also provide you with a range of services, such as real-time price feeds, market analysis, and educational resources.

They make money by charging a spread (the difference between the buying and selling price) or commissions on trades. In exchange, brokers give you access to the forex market, where you can trade and potentially profit.

Some brokers allow you to start trading with small amounts of money, making it easier for beginners to get started. You can access these platforms on your computer or mobile phone, so you can trade anytime, anywhere, as long as you have an internet connection.

1. Global Opportunities: The forex market operates 24 hours a day, five days a week. This means no matter where you are or what time zone you’re in, there’s always a chance to trade.?

Common Myths About Forex

Myth 1: Forex is a scam. This is one of the biggest misconceptions about forex. Why? Because a lot of people hear stories about scams or individuals losing money, and they assume the entire system is fake. The truth is, forex is completely legitimate—it’s the largest financial market in the world. However, the risk of losing money is real, and scammers often take advantage of people’s lack of knowledge by promising “guaranteed profits.”

To succeed in forex, you need proper risk management. This means never risking more money than you can afford to lose and avoiding greed. Many beginners fall into the trap of chasing quick money, but forex requires patience, skill, and learning. Having a mentor or trusted guide can also help you avoid mistakes and steer clear of bad practices.

Myth 2: Forex is gambling or like SportyBet. It’s easy to see why some think this. At first glance, forex can look like betting on whether a currency will go up or down. But unlike gambling, forex is a skill. Successful trading depends on understanding the market, analyzing trends, and using strategies—not luck. With proper education and practice, you can make informed decisions rather than random guesses.?

In conclusion, forex trading can be a powerful way to grow your finances, but it’s not a get-rich-quick scheme. With the right knowledge, risk management, and patience, you can navigate the market successfully. It’s all about learning, staying disciplined, and taking calculated steps toward your financial goals.