What Is Forex Trading?

Track 1 of the free forex trading courses. Spot FX is an OTC pair, not a share and not a listed future. Ownership lives on stock courses; listed FX futures on the futures hub.

You Are Always Long One Currency and Short the Other

Forex is the market for exchanging one currency for another. A quote like EURUSD is not “euro going up” in the abstract. It is euros in terms of dollars: how many dollars one euro buys. If you buy EURUSD, you are long euro and short dollar. If you sell it, you are long dollar and short euro. Beginners lose the plot by treating the pair as a single-name stock with a funny ticker. It is a relative price. Relative prices have two interest-rate regimes, two political calendars, and one dealer standing between you and the world.

Course 2 turns this into pips, lots, and position size. This course names the object so the pip math has somewhere to sit. Use the free calculators for dollar risk until the habit sticks.

1. Quote Convention

Base / quote. In EURUSD, EUR is the base, USD the quote. A rise from 1.0800 to 1.0900 means the euro bought more dollars. USDJPY prints yen per dollar — a different convention. If you cannot say which side is the base, you will invert P&L in your head and call it intuition.

Majors vs crosses vs exotics are later (Course 6). Today: pick one major, write the convention in the journal, and do not rotate nicknames mid-trade.

2. OTC, Not an Exchange Matching Engine

US cash equities match on exchanges and ATSs. US retail spot FX typically trades with a dealer (or through an FCM/RFED stack) over the counter. You see a bid/ask the firm (or its LP) is willing to show. That is not NYSE. Spreads, last-look, and last-print quality are dealer facts. Read broker and venue guides for listed plumbing; do not assume your FX app is the same building.

Crypto pairs on a token exchange are a third building. This hub does not teach them. If you mash “pairs” across crypto and G10 FX, you will import the wrong gap, the wrong hours, and the wrong regulator.

3. US Retail Leverage Is Capped — And Still Enough to Ruin You

CFTC retail forex leverage is typically taught as 50:1 on majors and 20:1 on other retail FX. Offshore 500:1 is not the US default. 50:1 still means a 2% adverse move can erase the margin on a maxed account. Leverage is not a strategy. It is a multiplier on error. Size from a dollar cap with a risk calculator, not from the maximum the platform enables.

Old NFA FIFO (Rule 2-43(b)) was repealed in 2020. Do not treat FIFO as current law. Your dealer may still ban hedging by house rule. Read the account agreement. Historical rules belong in a footnote, not in your live checklist.

4. Sessions Are the Liquidity Map

FX trades around the clock on weekdays. Liquidity is not constant. Tokyo, London, and New York each change the book. The London–New York overlap is where many majors are honest. Asia can be a quiet range that London deletes. Course 4 is the session lesson. Course 1 rule: if you cannot name the session you are in, you cannot name the spread you should accept.

A first-week protocol: pick one major pair, one session you will actually be awake for, and a written news policy (trade, reduce, or flatten). Three constraints prevent the 24-hour tape from becoming a 24-hour obligation. The tape does not pay you for attendance. It pays you for transferring risk when the book is honest enough to exit. Honest enough is a spread and a depth you can describe, not a mobile notification.

Interest-rate differentials leak into overnight swap. You do not need the full carry course to know that holding a pair past the dealer’s rollover cutoff is a position in rates as well as in spot. If you cannot tolerate a swap line item, you are a day-holder in that pair — flatten before cutoff. If you want the swap, you are running a mini carry and should size as if a risk-off day can unwind a week of differential in an hour. Carry is a later lesson. The warning belongs here because swap shows up on statements immediately.

Demo accounts lie in two directions: spreads are sometimes tighter than live, and your psychology is not live. A demo that prints 30% a month on 50:1 is a video game. Translate every demo trade into dollars on the account you will actually fund. If the dollar number would violate a 1% cap, the demo did not prove skill. It proved the slider.

US residents using an offshore dealer to dodge 50:1 are taking a regulatory and credit package that this course will not help you hide. This curriculum assumes a CFTC/NFA-relevant retail box. If your facts are different, your risk object is different. Name it. Do not mix an offshore 200:1 screenshot with a US process and call it research. A process that cannot be written in one paragraph — pair, session, stop in pips, dollar cap, flatten-or-hold at rollover — is not a process. It is a mood. Moods do not survive a Monday gap.

5. P&L Is in the Quote Currency Until You Convert It

A move in EURUSD from 1.0800 to 1.0850 is 50 pips. What 50 pips is worth in dollars depends on lot size — Course 2. For now, refuse to celebrate “pips” without a dollar translation. Run a P&L calculator as if the unit were a share, then replace the unit with a lot once Course 2 is in your hands. The listed glossary will not do this conversion for you. Your journal will.

6. Mistakes This Course Exists to Prevent

• Treating a pair as a stock.
• Maxing US 50:1 because the slider went there.
• Teaching repealed FIFO as if it still bound every US account.
• Ignoring that the dealer is the counterparty.
• Clicking through Sunday spreads as if they were London noon.

Key Takeaways

• A pair is two currencies. You are always two-legged.
• US retail spot FX is OTC under CFTC/NFA, with leverage caps.
• Sessions change the book. Name the session.
• Pips without dollars are decoration.
• Educational only. Not a recommendation to trade any pair.

Next in Track 1: Pips, Lots, and Position Size — already linked above. Educational only.