Foreign exchange – forex or FX – is the market where one currency is exchanged for another. Companies use it to pay suppliers abroad, investors to buy foreign shares, central banks to manage reserves, and speculators to profit from price changes. For people living in Europe it is also part of everyday life: the euro's value against the dollar affects the price of fuel, holidays and the returns on any foreign investment.
How prices are quoted
Currencies trade in pairs. In EUR/USD 1.1350, the euro is the base currency and the US dollar the quote currency: one euro costs 1.1350 dollars. If you think the euro will strengthen, you buy EUR/USD; if you think it will weaken, you sell.
Prices move in small steps called pips – 0.0001 for most pairs – and trade sizes are measured in lots of 100,000 units of the base currency, although brokers let you trade much smaller amounts.
Who trades, and where
There is no single exchange. Forex is an over-the-counter market made up of banks, electronic trading venues and market makers, active 24 hours a day from Sunday evening to Friday evening. London is the largest centre, followed by New York, Singapore and Hong Kong. Retail traders are a small fraction of the volume.
How Europeans access forex
| Route | What you hold | Typical user |
|---|---|---|
| CFDs / rolling spot FX with a broker | A contract with the broker on the price difference | Most retail traders in the EU |
| Spread bets (UK and Ireland only) | A bet on price movement, taxed differently | UK/Irish traders – see spread betting |
| Currency futures and options on exchanges such as CME or Eurex | Exchange-traded contracts | More advanced traders |
| Multi-currency accounts at banks and fintechs | Actual currency | People who need foreign currency, not speculation |
For retail traders, the broker matters as much as the market: it quotes your prices, holds your money and executes your orders. That is why this site is built around checking brokers first.
What moves the euro
- Interest rates and central banks. Decisions and speeches by the European Central Bank and the US Federal Reserve are the biggest drivers of EUR/USD.
- Inflation and growth data – euro-area inflation (HICP), German Ifo and PMI surveys, US jobs reports.
- Risk appetite. In times of stress, money tends to flow to the US dollar, Swiss franc and yen.
- Politics – elections, budget disputes and trade policy.
The honest part: the odds
Under EU rules every CFD broker must publish the percentage of its retail accounts that lost money over the past year. The figures are usually between about 60% and 80%. Leverage magnifies small price moves, costs are paid on every trade, and currency markets are dominated by professionals with better information and tools.
If you want to learn, start with a demo account, understand leverage under ESMA rules, use a broker with a European licence, and risk only money you can afford to lose. Many people who are really looking to grow savings are better served by low-cost investing – see ETF savings plans in Europe.
Frequently asked questions
How big is the forex market?
Do I own currency when I trade forex with a broker?
This guide is general information, not personal financial, tax or legal advice. Rules change; we review this page regularly and show the date of the last update above. Found an error? Tell us. See our editorial policy.
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