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Forex
What is forex trading and how does it work?
Last reviewed:
Short answer
Forex (foreign exchange) trading means buying one currency and selling another at the same time, hoping the exchange rate moves in your favour. Currencies trade in pairs such as EUR/USD or USD/PKR. Most retail "forex trading" online is speculation through leveraged contracts rather than actually exchanging cash, which makes both profits and losses much larger than the money you put in.
Currency pairs: what you are actually buying
Every forex price compares two currencies. In EUR/USD = 1.0850, the euro is the base currency and the US dollar is the quote currency: one euro costs 1.0850 dollars. Buying the pair means you expect the euro to rise against the dollar; selling it means you expect it to fall.
The most traded pairs worldwide are the "majors", which all include the US dollar: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD and USD/CAD. USD/PKR is an "exotic" pair — it moves mostly with Pakistan's balance of payments, State Bank policy and IMF programmes, and offshore brokers often quote it with very wide spreads.
Pips, lots and spreads
| Term | Meaning | Example |
|---|---|---|
| Pip | The standard smallest price step — 0.0001 for most pairs, 0.01 for JPY pairs | EUR/USD moving from 1.0850 to 1.0851 is one pip |
| Standard lot | 100,000 units of the base currency | 1 lot of EUR/USD = €100,000 |
| Mini / micro lot | 10,000 / 1,000 units | 0.01 lot = €1,000 |
| Pip value | Profit or loss per pip for a given size | About $10 per pip on 1 standard lot of EUR/USD — roughly Rs 2,800 at Rs 280 per dollar |
| Spread | Gap between buy (ask) and sell (bid) price — the broker's built-in fee | Bid 1.0850 / Ask 1.0852 = 2-pip spread |
Why leverage changes everything
Online brokers let you control a large position with a small deposit — 1:100 leverage means $100 controls $10,000. A 1% move against you then wipes out 100% of your deposit. Regulators in Europe found that most retail CFD accounts lose money, and brokers there must publish that percentage; it is commonly 70% or higher. Leverage is the main reason beginners blow up accounts quickly.
What moves exchange rates
- Interest-rate decisions by central banks (the US Federal Reserve, the ECB, the State Bank of Pakistan).
- Inflation, jobs and growth data — the US non-farm payrolls report is one of the most volatile events of the month.
- Trade balances and remittances — for the rupee, workers' remittances and import bills matter a lot.
- Risk sentiment: in a panic, money tends to flow into the US dollar, the Japanese yen and gold.
Forex in Pakistan: the two things to know first
Legally, speculative forex is only allowed through SECP-regulated venues such as PMEX; offshore brokers are not regulated here and funding them can breach State Bank rules. Religiously, most Pakistani scholars consider leveraged online forex impermissible. Read both of our related articles before opening any account.
Roman Urdu mein jawab
Forex trading kya hai?
Forex trading mein aap ek currency khareedte aur dusri bechte hain, is umeed par ke rate aap ke haq mein jayega — jaise EUR/USD ya USD/PKR. Online forex zyada tar leverage wale contracts hote hain, is liye nafa aur nuqsan dono aap ki raqam se kai guna barh jate hain. Pakistan mein sirf PMEX jaisa regulated rasta legal hai.
Frequently asked questions
How much money do I need to start forex trading?
Brokers accept very small deposits, but a small account with high leverage is the fastest way to lose everything. Learn on a demo account first, and only trade money you can afford to lose.
What are the best forex trading hours in Pakistan?
Activity is highest when the London and New York sessions overlap, roughly 5 pm to 9 pm Pakistan time (PKT), depending on daylight saving in the UK and US.
Is forex trading a scam?
The currency market itself is real and enormous. Many schemes sold to Pakistanis as "forex" are scams, though — especially those promising fixed monthly returns or account management. Use only regulated platforms.
What is a demo account?
A practice account with virtual money and real prices. It teaches the mechanics without risk, though trading real money feels very different.
What traders are saying
Ask the communityEUR/USD squeezing into a tight wedge ahead of ECB tomorrow
EUR/USD squeezing into a tight wedge ahead of ECB tomorrow. Expecting a big move either way. #Forex
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📊 ට්රේඩින් වල රහස: Support සහ Resistance හරියටම අඳුරගන්නේ කොහොමද? ඕනෑම මූල්ය වෙළඳපොළක (Crypto, Forex හෝ Stocks) සාර්ථක වීමට නම් අනිවාර්යයෙන්ම දැනගත යුතු මූලිකම සංකල්පය තමයි "Support & Resistance" කියන්නේ.…
EUR/USD is forming a solid support block on the 4H timeframe
nipu ·
EUR/USD is forming a solid support block on the 4H timeframe. 📈 Waiting for a bullish engulfing candle to confirm a long entry. Target 1: 1.0950, Target 2: 1.1000. Stop loss below the wick. Always trade with proper…