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Foreign Exchange Trading: What Beginners Should Know

Foreign exchange trading for investors: how currency markets work, why most long-term investors are exposed to them anyway, and what trading them involves.

AtlanticQuote editorial team. Updated 26 September 2026. How we work

Flowing river of light made of tiny currency symbols

The essentials

  • Buying foreign shares means holding their currency too; exchange rate moves change your return.
  • Currencies are quoted in pairs such as GBP/USD and move in pips.
  • Leveraged currency trading is high risk; most retail CFD accounts lose money.

You may already have currency exposure

If you live in the UK or eurozone and own US shares or a global index fund, a large part of your portfolio is priced in dollars. Suppose a US share rises 8% over a year while the dollar falls 5% against your home currency. In your own currency, your gain is roughly 3%. Over long periods currency effects often even out, but over a few years they can be large.

Four clocks showing London, New York, Tokyo and Sydney trading session times above a city skyline

How exchange rates are quoted

A quote such as EUR/USD 1.1000 means one euro buys 1.10 dollars. If it rises to 1.1500, the euro has strengthened and the dollar weakened. Rates are quoted to four decimal places; the fourth decimal is a pip.

What moves currencies

  • Interest rates: higher expected rates tend to attract capital and support a currency.
  • Inflation and growth: economic data shifts rate expectations. See the economic calendar.
  • Risk appetite: in market stress, investors often buy the US dollar, yen and Swiss franc.
Glass euro symbol and a glass dollar symbol balanced on a sleek scale

Currency-hedged funds

Some funds offer "hedged" share classes that use currency contracts to remove most of the exchange rate effect. Hedging costs money and removes the upside as well as the downside. Whether it suits you depends on your time horizon and what you want the investment to do.

Trading forex directly

Forex trading is usually done with leverage through a broker. Positions are measured in lots (1 lot = 100,000 units), and on pairs ending in USD a one-pip move on one lot is worth $10. In the UK, EU and Australia, retail traders are limited to 30:1 leverage on major pairs. Our pip calculator and margin calculator show the numbers involved.

Short-term currency trading is a very different activity from long-term investing. Regulators require brokers to disclose that most retail CFD accounts lose money.

Reader questions

Should I buy currency-hedged funds?

It depends on your circumstances. Hedging reduces currency swings but has costs; over long horizons some investors accept currency risk as part of diversification. This is general information, not advice.

When is the forex market open?

From Sunday evening to Friday evening New York time, 24 hours a day.

Further reading