Quick take
- EUR/USD works like BTC/USDT: the first currency is what you buy, the second is what you pay with.
- Currency prices move in tiny steps called pips, so positions are larger and usually leveraged.
- Retail leverage is capped in many countries, and markets close at weekends.
If you know BTC/USDT, you already know the format
A crypto pair such as BTC/USDT tells you how many USDT one bitcoin costs. A currency pair works the same way. EUR/USD at 1.0850 means one euro costs 1.0850 US dollars. The first currency is the base, the second is the quote. Buying the pair means buying euros with dollars; selling it means the reverse.
The big difference: size of moves
Bitcoin can move 5% in a day. EUR/USD more often moves between 0.3% and 1%. Because the moves are small, forex prices are quoted to four or five decimal places, and the standard unit of movement is the pip: 0.0001 for most pairs and 0.01 for yen pairs.
Positions are measured in lots. A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. On EUR/USD, one pip on a standard lot is worth $10. Our pip calculator works this out for any pair.
Leverage is normal, and capped
Because moves are small, forex is usually traded with leverage. The key difference from offshore crypto platforms is regulation: in the UK, EU and Australia retail traders can use at most 30:1 on major pairs, and the US limit is 50:1. At 30:1, a $3,600 deposit supports a $108,000 position, and a 1% move against you costs about $1,080. Use the margin calculator and position size calculator before placing any trade.
The market has office hours
Unlike crypto, forex shuts at weekends. It opens on Sunday evening New York time as Asian centres start their Monday, and trading passes through Tokyo, London and New York. The busiest period, with the tightest spreads, is the overlap of London and New York, roughly 13:00 to 17:00 GMT.
What moves currencies
- Interest rates set by central banks such as the Federal Reserve and European Central Bank. Higher expected rates tend to support a currency.
- Economic data such as inflation and employment figures, released on a published calendar.
- Risk mood: in a sell-off, money often flows into the US dollar, Japanese yen and Swiss franc, the same kind of moments when crypto tends to fall.
Costs
You pay the spread between the buy and sell price on every trade, sometimes a commission, and an overnight financing charge on leveraged positions held past the daily cut-off. Our guide to trading fees shows how these add up.
A worked example
You buy 0.2 lots of EUR/USD at 1.0850 with a stop-loss at 1.0825. The stop is 25 pips away and each pip on 0.2 lots is worth $2, so the planned maximum loss is $50 plus costs. If the price instead rises to 1.0900, the 50-pip gain is worth $100 before costs.
Common questions
Is forex more or less risky than crypto?
Currencies usually move less than crypto, but forex is normally traded with leverage, which can make losses just as large. Risk depends on position size far more than on the market.
Can I trade forex at the weekend?
No. The main forex market closes from Friday evening to Sunday evening New York time. Some providers quote weekend prices, but these are not the interbank market.
What is the forex equivalent of a stablecoin?
There isn't one. Currencies are the real thing that stablecoins try to track. A dollar stablecoin aims to be worth one US dollar, and USD itself is one side of many forex pairs.
Is the FX market open at weekends like crypto?
No. The FX market closes from Friday evening to Sunday evening New York time; crypto keeps trading.
Sources
- Bank for International Settlements, Triennial Central Bank Survey 2022
- European Securities and Markets Authority, product intervention measures on CFDs