Forex Trading Guide

Forex is the only major market that trades 24 hours a day, five days a week, because it is really a chain of overlapping regional sessions rather than one exchange with a bell. Sydney opens the week, Tokyo follows, then London, then New York, and the two busiest windows are the London-New York overlap and the early Tokyo-London handoff. Liquidity and volatility rise and fall with these overlaps, so a support or resistance level identified on a chart can behave very differently depending on which session is active when price reaches it. This is a direct extension of the technical analysis you learned earlier: the level itself does not change, but the conviction behind a breakout or reversal at that level does, depending on how many participants are actually trading at that moment.

The single biggest fundamental driver in forex is the interest-rate differential between two countries, which is the foundation of the carry trade. When one central bank holds rates meaningfully higher than another, capital tends to drift toward the higher-yielding currency, and shifts in that gap, more than the absolute level of rates, are what move price. This is why a rate decision that meets expectations can still cause a big move if the accompanying guidance changes how wide the market expects the differential to become in future meetings. It is fundamental analysis applied specifically to a two-sided asset, where you are never just judging one economy but the relative strength of two at once.

Volatility profiles also differ sharply by pair type. Major pairs like EUR/USD or USD/JPY are the most liquid instruments in the world and tend to move in relatively contained, orderly ranges outside of news events. Minor and exotic pairs, involving smaller or emerging-market currencies, carry wider spreads, thinner liquidity, and a higher chance of sharp, gappy moves, which changes the risk management math considerably: the same percentage stop-loss that is comfortable on a major pair can be far riskier on an exotic one once spread and slippage are accounted for.

Because most currencies are quoted against the US dollar, correlation runs through nearly every pair. A broad dollar rally tends to push EUR/USD, GBP/USD, and AUD/USD down together while pushing USD/JPY and USD/CHF up, so a trader holding several dollar-based positions at once may unknowingly be making one large, concentrated bet rather than several diversified ones.