Before you read on: this article is general education, not financial advice. It does not consider your objectives, finances or experience. Do your own research, check any broker on the register of its regulator, and speak to an independent adviser if you are unsure.
Last updated 29 October 2026.
Benefits and risks of forex trading
Forex is the largest financial market in the world, with trillions of dollars changing hands each day. Retail traders use it to speculate on currency price movements, and it has several features that attract beginners. This guide explains them, along with the risks that come with them.
Main benefits
Liquidity. Major pairs such as EUR/USD trade in very large volumes, so most orders can be filled quickly at a price close to the quote.
Low entry costs. Many brokers charge no commission on standard accounts and make their money from the spread. You can usually open an account with a small deposit, although the minimum varies by broker.
Trading in both directions. You can profit when a currency rises or falls, because you always buy one currency and sell another. Short-selling a stock often needs borrowing, which is not required in forex.
Access to leverage. Brokers can offer leverage, which lets you control a larger position with a smaller deposit. This is a feature and a risk, covered below.
Trading hours. Retail forex trades from Sunday evening to Friday evening, New York time, so you can trade outside a normal working day. Our guide on forex market hours explains the schedule.
Main risks
Leverage magnifies losses. At 1:30 leverage, a 3.3% move against a position can wipe out the full margin you posted. Losses can exceed what you expected if you do not use a stop-loss.
Costs add up. Spreads, swaps (overnight financing) and, on some accounts, commissions reduce the return on every trade. Frequent trading makes these costs larger.
Volatility and gaps. Prices can move sharply on news, and a stop-loss does not guarantee an exit at your chosen price if the market gaps.
Scams. Unregulated brokers and social-media trading offers are common. Check any broker on its regulator’s register before you deposit.
Worked example: the cost of a trade
Suppose you buy one mini lot (10,000 units) of EUR/USD. The spread is 1.5 pips, so you pay about $1.50 to enter, because one pip on a mini lot is worth about $1. If the pair moves 20 pips in your favour, you gain about $20 before costs. If it moves 20 pips against you, you lose about $20 plus the $1.50 spread. The spread is paid on every trade, so cost matters as much as direction.
Is forex trading gambling?
It can become gambling if you trade without a plan, without a stop-loss, or with money you cannot afford to lose. Trading with a written plan, defined risk per trade and realistic expectations is closer to a business process, but it still carries a high risk of loss.
Careers in forex
Some people work in forex as analysts, brokers or traders for institutions. Our guide to getting a forex trading job covers the routes into those roles.
Summary
Forex offers liquidity, low entry costs and two-way trading, but leverage and costs make losses easy to incur. Learn the basics, test a method on a demo account, and only risk money you can afford to lose.
Sources and further reading
We checked the regulatory claims in this article against the following primary sources. Rules change, so check the current version before you rely on any figure.
ESMA press release, 27 March 2018 (leverage caps, 50% close-out and negative balance protection for EU retail CFD clients, and the 74-89% loss statistic).
FCA statement on the ESMA measures (the UK position).
FCA policy statement PS19/18 (permanent UK restrictions on retail CFDs).
ASIC news release, 11 November 2020 (Australian leverage caps for retail CFDs from 29 March 2021, standardised margin close-out and negative balance protection). Check the current ASIC position before you rely on it.
Pip and lot definitions are market conventions rather than regulatory rules. Check the contract specification for each instrument with your broker.
Risk warning: trading forex and CFDs involves a high risk of loss, and most retail accounts lose money. This article is general education, not financial advice. Read our disclaimer.
Forex trading and the 24-hour myth
A common claim is that you can trade forex at any time of day. In practice, you can trade at most hours on weekdays, but the quality of the market varies. Quiet hours can have wide spreads and thin prices, and the best opportunities often come when two sessions overlap. Our guide to forex market hours sets out the schedule in detail.
Who trades forex, and why it is so large
Banks, companies, governments, funds and individuals all trade currencies. Companies use the market to pay suppliers and hedge foreign currency risk. Funds use it to diversify and to take positions on interest-rate expectations. Retail traders are a small share of the total volume, which is why retail trading is often described as a small part of a much larger market.
How you make and lose money
You make money when the currency you bought rises against the one you sold, or when the one you sold falls. You lose money in the opposite case. Profits and losses are measured in pips, and their cash value depends on your position size. Costs such as spreads and overnight swaps reduce every result, which is why a trader can be right about direction and still lose money.
Leverage: the feature that changes everything
Leverage lets you control a position much larger than your deposit. At 1:30 leverage, a $1,000 deposit can control a $30,000 position. That can increase gains, but it also increases losses by the same proportion. Many retail accounts lose money because positions are too large for the balance, not because the direction was wrong. Read our guide on leverage before you choose a leverage setting.
Protecting yourself
Only deposit money you can afford to lose. Use a stop-loss on every trade. Keep the risk on each trade small, for example 1% of the account. Use a regulated broker and check its licence on the regulator’s register. Avoid anyone who promises guaranteed returns, and be wary of unsolicited offers on social media.
Is forex a good fit for you?
Forex can suit people who want to learn about global markets, who can commit time to study, and who can accept losses without changing their plan. It may not suit people who need steady income, who would be tempted to borrow to trade, or who cannot control their emotions under pressure. There is no single right answer, and it is reasonable to decide after learning and practising on a demo account.
Risks you should weigh before starting
ESMA reported in March 2018 that 74% to 89% of retail accounts typically lose money on CFD trading, based on analysis by national regulators (see the ESMA press release, 27 March 2018). The reasons include high leverage, poor position sizing, trading without a plan, and paying spreads on frequent trades. These are not rare failures; they are the normal outcome for traders who do not change how they trade.
Forex also carries counterparty and platform risk. Choose a broker regulated by a recognised authority, and check that the entity you deposit with is the one that is regulated. Read the broker’s terms on withdrawals, negative balance protection and how it handles client funds.
Summary checklist for beginners
Learn what a pip, lot and spread are. Understand leverage before you choose a setting. Use a stop-loss on every trade. Keep risk per trade small. Practise on a demo account. Check the regulator register before you deposit. Expect most early results to be losses while you learn.
