Markets · 4 min read
Forex: How Currencies Trade
The foreign exchange (forex) market is where currencies are exchanged. It's the largest financial market in the world.
Why it matters
Currency moves affect imports, exports, travel, and returns on foreign investments.
Advantages
- 24-hour market
- High liquidity
- Useful for hedging
Risks
- Highly volatile
- Leverage amplifies losses
- Complex macro drivers
Real-world example
If USD/INR rises from 83 to 85, your ₹-priced import costs go up ~2.4%.
Key takeaways
- Understand the drivers: rates, growth, trade balance
- Retail forex trading is high-risk
- Currency hedging matters for international investors
Quick quiz
1. Which is the most traded currency pair globally?