How Forex Trading Works: All You Need to Know
- Ankit Gupta
- August 4, 2025
Introduction:
If you have ever traded or are familiar with trading in general, you must have heard about forex trading. It has a major proportion in the overall trading landscape; no matter which part of the world you go to, forex trading would have its significance there. In this blog, we will talk about what forex trading is, its key features, relevant terminology, how forex trading works, and how to trade in forex trading.u
What is Forex Trading?
In simple words, forex trading is the buying and selling of one currency for another, with the aim of making a profit from the price fluctuation. It is done mainly based on speculation on both rising and falling prices. For example, if you think that the price of the EUR will go up against the USD, you can open a buy trade of the EUR/USD, and if your prediction is right, you can make a profit.
The forex market is considered one of the most accessible markets in which central banks, financial institutions, corporations, hedge funds, and individual traders participate every day. Moreover, it is not only the most accessible but also the largest trading market.
To put it in perspective, take an example of the NYSE, its daily volume is $20 billion, and the forex market has an overall daily volume of $7.5 TRILLION. Do you see how massive is the forex market?
Key Features of Forex Trading:
Decentralized Market:
Forex trading provides a decentralized market to the traders, making it more accessible and easier to trade without the influence of any institution.
24/5 Open Market:
Unlike stock markets, the forex market does not close at the end of the business day. The forex market remains open from Sunday evening to Friday evening, usually 5 pm EST.
Market Size:
The market size of forex is enormous. The overall daily forex trade value is over 7 trillion.
Common Currency Pairs:
There are over a thousand currency pairs, but the most commonly traded pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, and AUD/USD.
Important Terminology in Forex Trading:
Forex Pair:
A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets. For instance, EUR/USD is a currency pair.
Base and Quote Currencies:
The base currency is the first currency in the currency pair. For example, in EUR/USD, EUR is the base currency and USD is the quote currency.
Pip:
A pip is the smallest unit used to measure the price change of a currency. It is usually 1/100 of 1%, or 0.0001.
Lot:
A lot is a standardized unit of currency that defines the quantity of the currency being traded.
How to Start Forex Prop Trading?
1. Choose a Forex Prop Firm:
The first step to get started with forex prop trading is choosing a prop trading firm. There are different factors, such as reward split, payout processing time, challenge rules, and more, which you have to consider while selecting a forex prop firm.
2. Select a Challenge:
Once you have selected a prop firm, the next step is to choose a challenge that aligns with your trading style. There are different types of accounts or challenges, such as 1-step challenge, 2-step challenge, and a direct account without any evaluation, which you can choose from. Different prop firms offer different types of accounts with different conditions. Make sure to read the conditions carefully before selecting and buying an account.
3. Learn the Basics:
This is the most important step if you are a beginner; you have to be very clear with the basics of forex trading. For example, the basic knowledge about what a forex pair is, what is base currency and, what is quote currency and other relevant things. It is also important that you research the forex market to get an idea about how things work and what the latest trends are. Eventually, as you go and learn more, you can improve your forex trading strategy.
4. Make a Trading Strategy:
You must create a solid trading strategy that will help you pass the challenge and get ahead in trading. Your trading strategy should be based on your trading style, your risk tolerance, the account size you would be trading, and more. There are different trading strategies, such as day trading, swing trading, scalping, and others, which you should study and create a plan with the one that resonates more with you.
5. Choose Your Forex Pairs:
There are thousands of trading pairs, but not all the forex pairs catch the eyes of the forex traders. There are some most traded pairs which you can also consider to get started, and later on, when you get more experienced, you can research more and try to find pairs, if needed, that closely match your trading style.
6. Start Trading:
Now you are all set and can start trading. While trading, you have to make sure that you stick to your trading strategy and avoid common trading mistakes. Before starting your challenge or trading, ensure that you are using a platform that you are somewhat familiar with.
7. Review and Revise:
The Last step in the trading journey is to review and revise your trading strategies based on your performance and what worked and what didn’t. Also, this is not a one-time thing; you should have a reviewing schedule where you sit down exclusively to review your performance and strategies.
Benefits of Forex Prop Trading:
1. Leverage:
One of the major benefits of trading forex with a prop firm is that you get more leverage and you can hold larger positions. Most firms provide a leverage of 100x, which allows you to trade for more than what you could have been able to afford otherwise.
2. Less Risk:
In forex prop trading, your risk is limited to only the challenge fee you pay, which is usually very less. The risk is less in this as you trade with the simulated capital of the prop firm. On the other hand, if you were to trade forex on your own, you risk your own money.
3. Advanced Trading Platforms:
Prop firms provide traders with advanced tools for free when traders trade with the prop firm. Moreover, you can choose from the best trading platform, as most firms give you 3 to 4 options from which you can choose. On the other hand, when you trade on your own, you only have access to the single tool that your broker provides.
4. Learning Potential:
Prop firms not only provide simulated capital but also a lot of learning resources such as guides, educational videos, question and answer sessions, and more. When you trade with Hola Prime, you also get access to top trading coaches and get 1-on-1 coaching. All you have to do is join the Discord channel, and there, you can book sessions with top coaches for free.
5. Reward Split:
With prop firms, you get to keep most of the profit you make. For example, when trading with Hola Prime, you can keep up to 95%. There can’t be anything better than this: you get to trade with a firm’s simulated capital with 100x leverage, and you get to keep up to 95% of the profits you make.
Conclusions:
We hope that you have a clear understanding of about forex market and how it works. Even if you are a beginner, you can still trade forex by learning the basics of trading and grow from there. We suggest starting with a prop firm, especially Hola Prime, so that you can learn without risking huge capital.
FAQs: How Forex Trading Works
1. How much money do I need to start forex trading?
A realistic capital to start is between $1,000 to $5,000. However, when you start forex trading with a prop firm, namely Hola Prime, you can get an account of $50K for $299.
2. Is trading forex a good idea?
Yes, absolutely. There are thousands of individual traders who have a sustainable forex trading career and who make good and consistent profits.
3. How can I learn forex trading?
There are many resources available, such as courses, videos by trading coaches on YouTube, demo accounts, and more. You can also start forex trading with a prop firm, where you can test your skills and improve.
4. What are the most commonly traded currency pairs?
The most commonly traded currency pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, and AUD/USD.
5. How much money do forex traders make?
It depends on the experience and capital of the trader. The more experience and capital you have, the more profit you can make.
Disclaimer: All information provided on this site is for educational purposes only, related to trading in financial markets. It is not intended as financial advice, business or investment recommendation, or as an opportunity or recommendation to trade any investment instruments. Hola Prime only provides an educational environment to traders, including tools, materials and simulated trading platforms which have data feed provided by Liquidity Providers. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local laws or regulations.