What Is Forex and How Trading Works.

Welcome. This is your first lesson, so we are going to assume you know nothing and build from the ground up. Every word that sounds like jargon gets explained before we use it. If something still feels unclear at the end, that is normal. Read it again tomorrow. Most traders I know needed two or three passes on this material before it clicked.

Forex is short for foreign exchange. It is the market where one currency is swapped for another. If you have ever changed dollars into euros at an airport kiosk before a holiday, you have taken part in the forex market. You gave up one currency and received another at a price, called the exchange rate.

The market is enormous. The Bank for International Settlements, which surveys the world's currency dealers every three years, reported average turnover of about $9.6 trillion per day in April 2025. Most of that comes from banks, businesses, investment funds and governments, not from individual traders. Keep that in mind. You are a very small participant in a very large market, and the price does not care what you think it should do.

There is no single building where forex happens. It is mostly an over-the-counter market, which means trades are arranged directly between parties such as banks and brokers rather than on one central exchange. That is why the price you see can differ slightly from one provider to another.

A currency has no price on its own. Asking 'what is the euro worth?' only makes sense if you say 'worth in what?' So forex prices are always written as a pair, such as EUR/USD.

The first currency is the base currency. The second is the quote currency. The number tells you how many units of the quote currency you need to buy one unit of the base currency. If EUR/USD is 1.0800, one euro costs 1.08 US dollars.

When that number goes up, the base currency has strengthened against the quote currency. When it goes down, the base has weakened. Say the full sentence out loud the first few times: 'EUR/USD went from 1.0800 to 1.0850, so one euro now buys more dollars, so the euro strengthened against the dollar.' It feels slow. It also stops you from getting the direction backwards, which is one of the most common mistakes new traders make.

Here is the key idea for this whole course. When you buy a pair, you are buying the base currency and selling the quote currency at the same time. When you sell a pair, you are selling the base and buying the quote. Every forex trade is a bet on one currency against another, never on one currency alone.

Going long means buying. You go long when your plan says the base currency is likely to strengthen against the quote currency. You make money if the price rises and lose money if it falls.

Going short means selling. You go short when your plan says the base currency is likely to weaken against the quote currency. You make money if the price falls and lose money if it rises.

New traders often ask how you can sell something you do not own. In everyday life you cannot. On a trading platform you are not handing over a pile of euros. You are opening a position, which is simply an open trade whose value changes as the price moves. The platform tracks the difference between where you opened and where you close. Selling first and buying back later is just the reverse order of buying first and selling later.

One more word you need: position size. That is how much of the base currency your trade controls. A position of 10,000 EUR/USD controls 10,000 euros. Bigger size means every price move is worth more money, in both directions.

A proprietary trading firm, usually called a prop firm, gives traders an account to trade under a set of rules. Many retail-facing prop firms today, including this one, run accounts on simulated capital. That means the trades are executed in a simulated environment rather than with your own deposited money.

On OA Funded, every account, evaluation and funded, uses simulated capital, and your evaluation fee pays for access to the evaluation service. The platform is TradeLocker and the instruments are FX and indices. You will learn the full OA Funded rules in later units. For now, the point is simple: know which product you are trading before you trade it, wherever you trade.

A simulated account changes what is at stake, not how the market behaves. Spreads, fast moves and your own emotions still show up. Treat practice trades as if each dollar were real. Traders who treat a simulated account like a video game usually build habits that fail them later.

Every trade you ever take follows the same short sequence. Learn it now and the rest of the course hangs on it.

First, you form a plan: which pair, which direction, and why. Second, you decide where you would be wrong. That price becomes your stop-loss, an instruction to close the trade automatically if the price reaches it. Third, you choose a position size so that, if the stop is hit, the loss is an amount you have already accepted. Fourth, you place the order and check it before you send it. Fifth, you manage the trade according to your plan, not according to your mood. Sixth, you close it and write down what happened.

Notice what comes before clicking buy or sell: a reason, a place where you are wrong, and a size. Most beginners do it the other way round. They click, then think about the stop, then panic about the size. We will spend the next few units making the right order automatic.