What is forex and how to start trading CFDs with Lumiex

What is forex trading?

It’s the gateway to the world’s largest financial market – the foreign exchange market – where traders buy and sell currencies, aiming to profit from changes in exchange rates.

In the forex market, trading takes place around the globe, 24 hours a day, through a vast network of participants: from individual traders at home to banks, hedge funds, and multinational corporations. This diversity is what makes forex one of the most liquid and active markets in the world.

At Lumiex, forex trading is offered through CFDs (Contracts for Difference). Instead of owning the actual currency, you speculate on whether its price will rise or fall. CFD trading can amplify both profits and losses, so understanding how it works – and the risks involved – is essential before you start.

In this guide, we’ll break down the essentials of forex and walk you through your first steps in CFD trading with Lumiex, helping you build a solid foundation before you risk real capital. Whether you’re completely new to trading or an experienced trader brushing up on the basics, this guide is for you.

Understanding the basics of forex

“Forex” (foreign exchange) is the global marketplace where currencies are exchanged at constantly changing rates. It exists to make international trade and investment possible.

• When a European company pays a supplier in the US, it needs to convert euros to US dollars.

• When a tourist travels abroad, they exchange their local currency for the currency of the country they visit.

• When an investor wants exposure to a foreign asset, forex is often involved somewhere in the process.

According to the BIS Triennial Survey (2022), more than $7.5 trillion worth of currency changes hands in forex markets every day. That scale is what makes forex so deep and liquid.

In short, the forex market:

• Facilitates global trade and investment by allowing smooth currency conversion.

• Supports economic growth by enabling cross-border flows of goods, services and capital.

• Creates opportunities for traders who speculate on changes in exchange rates.

When you trade forex CFDs with Lumiex, you’re taking positions on these exchange rate movements – for example, whether EUR/USD will go up or down – without having to physically exchange currencies at a bank.

The importance of forex reserves in global economic stability

Behind the scenes of the forex market sit foreign exchange reserves – large holdings of foreign currencies and other liquid assets owned by central banks and governments. These reserves are crucial for overall economic stability:

• They act as a financial buffer.

  Countries can use reserves to support their own currency during periods of sharp volatility.

• They help manage inflation and currency value.

  By intervening in the forex market, central banks can influence exchange rates, which can feed into domestic prices.

• They allow countries to meet external obligations.

  Forex reserves are used for international debt payments and to honour cross-border financial commitments.

A strong level of reserves is often seen as a sign of a resilient economy. It reassures investors that a country has the resources to withstand financial shocks, defend its currency if necessary, and maintain a stable environment for long-term growth. For traders, this backdrop of stability (or lack of it) can have a direct impact on how currencies behave in the market.

Operating times: forex market hours and the forex calendar

To trade forex effectively with Lumiex, you need more than just chart patterns and indicators. You must also understand when the market is most active and what events can move prices.

In this section, we will look at:

• When the forex market is open.

• How forex market hours can influence your trading style and strategy.

• How to use an economic / forex calendar to prepare for major announcements.

• Why a 24-hour market doesn’t mean you should trade non-stop.

The forex market operates 24 hours a day during weekdays, as trading passes from one major financial centre to another. Within that continuous flow, certain times of day see more volume, stronger trends and sharper volatility – all of which can affect your trading results.

Forex market hours and their impact on trading strategies

Forex market hours can dramatically influence the performance of your strategy. Even though the market is technically open all day (Monday to Friday), not all hours are equal.

Periods of high activity typically offer:

• Tighter spreads

• Higher liquidity

• Faster execution

• Clearer trends

Quieter periods can mean:

• Wider spreads

• Slower price movement

• More random, “choppy” behaviour

Designing a trading plan with Lumiex means aligning your strategy with the sessions that best fit your style and the instruments you trade. Three key elements to consider are:

1. Forex trading sessions

2. Overlap periods between sessions

3. Overall market volatility

Let’s start with the sessions themselves.

Forex trading sessions

Because forex is a global, decentralized market, trading follows the working hours of major financial centres. Typically, traders refer to four main sessions:

• Sydney session

• Tokyo session

• London session

• New York session

As each session opens and closes, liquidity and volatility shift. Certain currency pairs tend to be more active in specific sessions – for example, JPY pairs during the Asian session, or EUR and GBP pairs during the London session.

In later sections of this guide (which we can draft next), we can break down each session in more detail and show how Lumiex traders can tailor their strategies to these different market conditions.