What is forex?

Forex (short for foreign exchange, also written FX) is the global market where currencies are exchanged. Whenever a Tanzanian importer pays a supplier in US dollars, a tourist changes euros into shillings in Arusha, or a bank moves money between countries, a currency is being bought and another sold.

It is the largest financial market in the world. There is no single exchange building: forex is traded electronically between banks, brokers, companies and individuals around the clock, five days a week.

Who takes part

  • Central banks, such as the Bank of Tanzania, which manage their country's currency and reserves.
  • Commercial banks, which trade huge volumes for themselves and their clients.
  • Businesses, which exchange currencies to pay for imports, exports and investments.
  • Investment funds, which buy foreign assets or hedge currency risk.
  • Retail traders, individuals who speculate on currency movements through an online broker.

What "forex trading" means for an individual

When people talk about forex trading online, they usually mean speculating on whether one currency will rise or fall against another, using an account with a broker. You never collect a bag of dollars or euros. You open and close positions on a platform, and your account is credited or debited with the difference.

Most retail forex is traded with leverage, which lets you control a position larger than your deposit. Leverage is why small price moves can produce large gains and large losses. We cover it properly in Module 7.

When the market is open

Forex trades 24 hours a day from Monday morning in Asia to Friday evening in New York. In East Africa Time (EAT), the week opens around midnight Sunday into Monday and closes around midnight Friday into Saturday. Activity is usually highest when the London and New York sessions overlap, roughly 4pm to 7pm in Tanzania.

What you will learn in this course

Over 18 short lessons you will learn how prices are quoted, how profits and losses are calculated, what trading really costs, how to protect your account with stop losses and sensible position sizes, how to choose a broker, and how to practise safely on a demo account.