Forex is the market in which one currency is exchanged for another. When a British company pays a supplier in dollars, when a tourist changes euros for pounds, and when a bank adjusts the balance of currencies it holds, each of those transactions is a forex trade. Added together they make the largest market in the world by daily turnover, open from Sunday evening to Friday evening UK time, because there is always a financial centre somewhere in its working day.
A retail trader does not exchange physical money. They take a position on whether one currency will rise or fall against another, and the profit or loss is settled in the currency of their trading account.
How a pair is quoted
Currencies are always traded in pairs, because a currency has no price on its own. EUR/USD is the price of one euro in US dollars. If EUR/USD is 1.0850, one euro costs 1.0850 dollars.
The first currency in the pair is the base currency and the second is the quote currency. Buying EUR/USD means buying euros and paying for them in dollars. Selling EUR/USD means the opposite. When the euro strengthens against the dollar the number rises, and a trader who bought the pair is in profit.
Every pair carries two prices at once. The bid is the price at which you can sell, and the ask is the price at which you can buy. The ask is always slightly higher than the bid, and the difference is the spread, which is covered on its own page. A quote shown as 1.0850 / 1.0852 means you can sell at 1.0850 or buy at 1.0852.
Majors, minors and crosses
The pairs that include the US dollar and one other large currency, such as EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD and NZD/USD, are the majors. They have the largest turnover and the tightest spreads.
Pairs between two large currencies that do not include the dollar, such as EUR/GBP, EUR/JPY or GBP/AUD, are crosses. Their spreads are a little wider. Pairs involving a smaller or less freely traded currency, such as USD/TRY or EUR/PLN, are exotics, and they cost considerably more to trade.
Suppose GBP/USD is quoted at 1.2700 / 1.2702 and you expect the pound to rise. You buy at 1.2702. Later the quote is 1.2760 / 1.2762 and you close the trade by selling at the bid, 1.2760. The price moved 58 pips in your favour. What that is worth in money depends on the size of the position, which is the subject of the pages on pips and lots.
An Expert Advisor reads the bid and ask directly from the broker's feed and places its orders against them. Two practical points follow.
Symbol names differ between brokers. One broker calls the pair EURUSD, another EURUSD.m or EURUSDpro. A well-built EA reads the symbol it is attached to rather than assuming a name, but it still has to be attached to the right chart, and a multi-market EA has to be told which of the broker's symbols correspond to the markets it trades. The setup guide for any EA should cover this.
Quotes are only available while the market is open. An EA that trades on weekly bars, for instance, will do most of its work at the Sunday open and Friday close, and the quality of the broker's prices at those times matters more than at midweek. Thin liquidity at the open and close is one reason spreads widen there, and a spread filter is one of the first things a careful EA includes.