How Forex Trading Works
A step-by-step overview of how forex trading works from order placement to execution.
Last reviewed: 2026-03-06
Article content
Overview
Forex trading involves speculating on the price movement of currency pairs. You buy (go long) when you expect the base currency to strengthen, or sell (go short) when you expect it to weaken. Your profit or loss is determined by how much the price moves in your favor or against you.
Order Types
Common order types include
- Market order: Execute immediately at the current price.
- Limit order: Execute when price reaches a specified level.
- Stop loss: Close the trade at a set price to limit losses.
- Take profit: Close the trade at a set price to lock in gains.
Execution
When you place an order, your broker sends it to the market. Execution speed and slippage (difference between expected and actual fill price) vary by broker and market conditions. During high volatility, slippage can be significant.
FAQ
Common questions about this topic.
What does going long mean?
Going long means buying a currency pair. You profit when the base currency appreciates relative to the quote currency.
What does going short mean?
Going short means selling a currency pair. You profit when the base currency depreciates. You can short in forex without owning the currency.
When is the forex market open?
The forex market is open 24 hours from Sunday evening to Friday evening (UTC). Major sessions include Sydney, Tokyo, London, and New York.
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Disclaimer and sources
Educational content only. Not financial advice.
Important disclaimer
Forex trading involves risk. Past performance does not guarantee future results.