What is Forex Trading?

The Official Definition:

Forex (foreign exchange) trading is the simultaneous buying of one currency and selling of another for the purpose of profiting from the change in exchange rates between those two currencies.

But what does that actually mean in plain English?

Let’s break it down with a concrete example:

Real-World Scenario:

It’s Monday morning, January 15th, 2024. You’re looking at the EUR/USD currency pair on your trading platform. The price shows 1.0850. This means:

• 1 Euro costs $1.0850 US Dollars
• If you want to buy 10,000 euros, you need $10,850 US dollars

You believe the Euro is going to strengthen against the Dollar over the next few days because you’ve read that the European Central Bank is likely to raise interest rates (which typically strengthens a currency), while the US Federal Reserve is signaling they’re done with rate hikes.

Here’s what you do:

Monday, 9:00 AM:

• You BUY 10,000 euros (which means you simultaneously SELL $10,850)
• Your trading platform shows: “Long EUR/USD, 0.10 lots at 1.0850”
• You set a stop loss at 1.0800 (50 pips below, protecting you from a $50 loss)
• You set a take profit at 1.0950 (100 pips above, targeting $100 profit)

Wednesday, 2:00 PM:

• The ECB announces a surprise rate hike
• EUR/USD jumps to 1.0950 in minutes
• Your take profit triggers automatically
• Your 10,000 euros are now worth $10,950 instead of $10,850
• You close the trade and bank $100 profit

That’s forex trading. You predicted a currency movement correctly, positioned yourself to profit from it, and walked away with money.

Now let’s look at the opposite scenario:

What if you were wrong? What if the Euro weakened instead?

Monday, 9:00 AM:

• Same trade: Buy EUR/USD at 1.0850
• Same stop loss at 1.0800

Tuesday, 10:00 AM:

• Surprise US economic data shows much stronger than expected growth
• Dollar surges in strength
• EUR/USD drops quickly to 1.0800
• Your stop loss triggers automatically
• You close the trade with a $50 loss

This is also forex trading. Not every trade wins. Professional traders win 50-60% of the time but still profit overall because they cut losses quickly and let winners run.

The Key Insight:

Unlike buying a stock where you simply hope it goes up, forex trading is about the relationship between two currencies. You’re not buying the Euro and holding it hoping it becomes worth more universally—you’re betting that the Euro will gain value relative to the Dollar specifically.

This is crucial because:

• The Euro could strengthen against the Dollar (EUR/USD up)
• But weaken against the British Pound (EUR/GBP down)
• At the same time

You’re always trading a pair, always comparing one against another.

Why “Forex” and not just “Currency Trading”?

Forex is short for “Foreign Exchange”—the market where foreign currencies are exchanged. The terms are interchangeable:

• Forex trading
• FX trading
• Currency trading
• Foreign exchange trading

All mean the same thing. Most professionals just say “forex” or “FX.”

How Big is the Forex Market? Mind-Blowing Statistics

The Numbers That Will Shock You:

The forex market processes $7.5 TRILLION in daily trading volume (Bank for International Settlements, 2022 Triennial Survey).

Let me put that in perspective:

Daily Trading Volume Comparison:

• Forex: $7.5 trillion per day
• US Stock Market (NYSE): $450 billion per day
• Global Stock Markets Combined: ~$900 billion per day
• Bitcoin/Crypto (all exchanges): ~$50 billion per day

Forex is 16x larger than all global stock markets combined.

What does $7.5 trillion look like?

If you stacked $7.5 trillion in $100 bills:

• The stack would be 5,085 miles high
• That’s enough to reach from New York to London and back twice
• It would weigh approximately 82,500 tons
• You’d need 1,650 fully-loaded Boeing 747s to carry it

And this happens every single day.

Why is it so massive?

Unlike stocks, which trade on centralized exchanges (NYSE, NASDAQ), forex is:

1. Decentralized – No single exchange, trades happen globally across banks, brokers, institutions
2. 24-hour market – Trades around the clock as markets open in Sydney, Tokyo, London, New York
3. Essential for global commerce – Every international transaction requires currency exchange
4. Used by everyone – Governments, corporations, banks, hedge funds, retail traders

Who trades forex and why?

1. International Corporations ($2.5 trillion daily)

Example: Apple sells iPhones in Europe

• Receives payment in Euros
• Needs to convert Euros to Dollars for US operations
• Uses forex market to exchange billions monthly
• Must hedge against unfavorable rate changes

2. Central Banks and Governments ($500 billion daily)

Example: Bank of Japan intervention, September 2022

• USD/JPY hit 145.00 (yen extremely weak)
• BOJ sold ~$20 billion USD, bought Yen in minutes
• Rate dropped to 140.50 in hours
• Attempting to stabilize their currency

3. Hedge Funds and Investment Banks ($2 trillion daily)

Example: Bridgewater Associates (world’s largest hedge fund)

• Manages $150 billion in assets
• Trades forex to hedge international investments
• Makes directional currency bets
• Seeks profit from macro trends

4. Commercial Banks ($1.5 trillion daily)

Example: JPMorgan Chase forex trading desk

• Facilitates currency exchange for corporate clients
• Proprietary trading (trading bank’s own money)
• Market-making (providing liquidity)

5. Retail Traders – That’s YOU ($1 trillion daily)

This is the category you’d be entering:

• Individual traders with accounts from $100 to $100,000+
• Trading from home, office, or mobile
• Access same markets as institutions (thanks to technology)
• Can start with as little as $100

The shocking truth: Retail traders represent only 13% of total volume, but that’s still $1 trillion daily—larger than the entire US stock market.

How Does Forex Trading Actually Work? Step-by-Step Mechanics

Let me walk you through a real trade from start to finish with exact screenshots of what you’d see and do.

Scenario Setup:

• Your Account: $5,000 (realistic beginner amount)
• Your Strategy: Trade the GBP/USD based on Bank of England rate decision
• Date: Thursday, March 21st, 2024, 7:00 AM EST
• Event: Bank of England announces interest rate at 7:00 AM

Pre-Trade Research (This happens BEFORE you trade):

You’ve done your homework:

• BOE expected to hold rates at 5.25%
• But BOE Governor’s recent speeches sound hawkish (pro-rate hike)
• Market pricing in 60% chance of surprise hike to 5.50%
• If they hike, GBP will likely strengthen vs USD
• If they hold, GBP may weaken slightly (disappointed expectations)

Your analysis: 60% chance they hike. Worth the trade.

Step 1: Open Your Trading Platform (6:50 AM)

You log into MetaTrader 4 (the most popular forex platform).

What you see on screen:

Market Watch (Left Panel):
- EUR/USD: 1.0847 / 1.0848
- GBP/USD: 1.2625 / 1.2627  ← You're watching this one
- USD/JPY: 151.23 / 151.25
- AUD/USD: 0.6543 / 0.6545

Chart (Center):
- GBP/USD, 1-Hour timeframe
- Price hovering at 1.2625
- Been in tight range 1.2600-1.2650 for 2 days
- Awaiting BOE decision

Understanding the Two Prices:

GBP/USD: 1.2625 / 1.2627

• 1.2625 = BID (price you can SELL at)
• 1.2627 = ASK (price you can BUY at)
• 2 pip spread = Broker’s commission

Step 2: Calculate Your Risk (6:55 AM)

Before touching anything, you calculate position size using 1% risk rule.

Your calculations:

• Account: $5,000
• Risk: 1% = $50 maximum loss
• Trade plan: Buy GBP/USD if BOE hikes
• Stop loss: 40 pips below entry (protects from false spike)
• Required lot size: ???

Using position size formula:

Lot Size = Risk ($) ÷ (Stop Loss Pips × Pip Value)

For GBP/USD:
- 0.10 lots = $1 per pip
- 0.01 lots = $0.10 per pip

Calculation:
- Risk: $50
- Stop: 40 pips
- $50 ÷ 40 = $1.25 per pip needed
- Lot size: 0.12 or 0.13 lots (you round to 0.12)

Verification:
- Lose 40 pips × $1.20 per pip = $48 loss ✓ (under $50)

You write this down. Never trade without knowing your exact risk.

Step 3: The BOE Announcement (7:00 AM)

7:00:00 AM – Headline Hits:

⚠️ BREAKING: BANK OF ENGLAND RAISES RATES TO 5.50%
"Further tightening may be necessary if inflation persists"

What happens on your chart (live action):

6:59:58 AM - GBP/USD: 1.2625
7:00:02 AM - GBP/USD: 1.2640 (+15 pips in 4 seconds)
7:00:15 AM - GBP/USD: 1.2670 (+45 pips in 17 seconds)
7:00:45 AM - GBP/USD: 1.2695 (+70 pips in 47 seconds)
7:01:30 AM - GBP/USD: 1.2710 (+85 pips, starting to slow)

Absolute chaos. Your heart is pounding.

Step 4: Enter Your Trade (7:02 AM)

Initial spike is settling. Price now at 1.2705. Time to enter.

You click “New Order” button:

Order Entry Screen:

Symbol: GBP/USD
Volume: 0.12 lots
Type: Market Execution
Stop Loss: 1.2665 (40 pips below current price)
Take Profit: 1.2785 (80 pips above, targeting 1:2 risk-reward)

Risk: $48 (0.96% of account) ✓
Reward: $96 (if target hit) ✓
Risk-Reward Ratio: 1:2 ✓

You take a breath. Double-check everything. Click “BUY”.

Confirmation appears instantly:

✓ Order Executed
GBP/USD: Long 0.12 lots at 1.2705
Stop Loss: 1.2665
Take Profit: 1.2785
Profit/Loss: $0.00 (just opened)

Trade is live. You’re in the market.

Step 5: Managing the Trade (7:02 AM – 10:30 AM)

Now you wait. Here’s what happens over the next 3.5 hours:

7:15 AM: Price pulls back to 1.2690. Your P/L shows -$18. You’re tempted to close but your stop loss is there for a reason. You leave it alone.

7:45 AM: Price pushes up to 1.2740. Your P/L shows +$42. You’re up 35 pips. Tempted to take profit but your plan says wait for 80 pips. Stick to the plan.

8:30 AM: US economic data comes out (weekly jobless claims). Dollar weakens further. GBP/USD jumps to 1.2770. Your P/L shows +$78. You’re 10 pips from target.

9:15 AM: Price consolidates at 1.2765. Your P/L fluctuates between +$70 and +$78. You’re getting nervous it might reverse.

10:27 AM: Sudden push. GBP/USD hits 1.2785.

10:27:15 AM: Your screen flashes:

✓ TAKE PROFIT TRIGGERED
GBP/USD: Closed at 1.2785
Entry: 1.2705
Exit: 1.2785
Profit: 80 pips
Profit: +$96.00

Trade complete. You made $96 in 3 hours and 25 minutes.

Step 6: Post-Trade Analysis (10:30 AM)

You immediately open your trading journal (Excel spreadsheet) and record:

Date: March 21, 2024
Pair: GBP/USD
Direction: Long (Buy)
Entry: 1.2705
Stop Loss: 1.2665
Take Profit: 1.2785
Lot Size: 0.12
Risk: $48 (0.96%)
Result: WIN +$96 (+1.92%)
Risk-Reward: 1:2
Holding Time: 3h 25min
Setup: BOE rate hike surprise
Emotional State: Nervous when pulled back to 1.2690, but stuck to plan
Lesson: Plan worked. Patience paid off. Following stop/target rules = success

This journal entry is MORE important than the $96 profit. It teaches you what works.

What This Example Teaches:

1. Preparation matters – You researched before trading, not during
2. Risk management is everything – You knew exact loss if wrong ($48)
3. Patience wins – You didn’t panic when price pulled back
4. Plans prevent emotions – Your preset stop/target removed decision-making during trade
5. Journaling builds skills – Recording teaches you what works

But let’s also show what happens when you LOSE:

Alternative Scenario: The Trade Goes Wrong

Same setup, but this time BOE holds rates (doesn’t hike):

7:00:00 AM – Headline:

⚠️ BANK OF ENGLAND HOLDS RATES AT 5.25%
"Will monitor data before considering further moves"

Market reaction:

6:59:58 AM - GBP/USD: 1.2625
7:00:02 AM - GBP/USD: 1.2605 (-20 pips in 4 seconds) ← Opposite direction!
7:00:30 AM - GBP/USD: 1.2580 (-45 pips)
7:01:15 AM - GBP/USD: 1.2555 (-70 pips)

You were planning to buy (go long), but price is crashing. Your analysis was wrong. The hike didn’t happen.

Decision point:

BAD DECISION: “Let me buy anyway, it’ll bounce back!”

• This is how accounts blow up
• Fighting the market never works
• You’d watch losses mount

GOOD DECISION: “My thesis was wrong. Don’t trade.”

• You lose nothing
• You preserved capital
• You wait for next opportunity

The Lesson: Not every setup works out. If your reason for the trade disappears, so should the trade.

But what if you already entered BEFORE the news (bad timing)?

Let’s say you bought at 1.2625 at 6:55 AM (before announcement):

Your Position: Long GBP/USD at 1.2625
Your Stop Loss: 1.2585 (40 pips below)

7:00:30 AM: Price crashes to 1.2580
7:00:35 AM: Your stop loss triggers at 1.2585

Order Closed:
Entry: 1.2625
Exit: 1.2585
Loss: -40 pips
Loss: -$48.00

You lost $48. But here’s why this is actually GOOD:

1. Your loss was exactly what you planned ($48, which was 0.96% of account)
2. Your stop loss saved you from much worse (price went to 1.2555, which would’ve been -$84 loss)
3. You still have $4,952 in your account to trade again
4. One loss doesn’t hurt you (you can lose 100 times at this size and still have money)

This is how professional traders think. Losses are part of the business. What matters is:

• Losses are small and controlled
• Wins are larger than losses
• Over 50+ trades, you’re profitable

Currency Pairs Explained: Why You’re Always Trading Two Currencies

This confuses every beginner, so let’s make it crystal clear with real scenarios.

The Core Concept:

In forex, you can NEVER buy just one currency. It’s impossible. You must simultaneously:

• BUY one currency
• SELL another currency

Why?

Think about the airport currency exchange:

• You hand over $1,000 USD (you’re SELLING dollars)
• You receive €920 EUR (you’re BUYING euros)
• This is one transaction but involves TWO currencies

Forex trading is the exact same thing, just faster and electronic.

How Currency Pairs Work:

Every pair has two sides:

EUR/USD = 1.0850

EUR/USD
 ↑   ↑
 |   └── Quote Currency (what you're selling)
 └────── Base Currency (what you're buying)

Reading this quote:

• 1 Euro costs 1.0850 US Dollars
• If you want 1 Euro, you pay $1.0850
• If you want 10,000 Euros, you pay $10,850

Example 1: Buying EUR/USD

What you’re actually doing:

• BUYING Euros
• SELLING US Dollars
• Betting that the Euro will STRENGTHEN vs the Dollar

Real scenario:

Monday: EUR/USD = 1.0850

• You buy 10,000 EUR (costs you $10,850)

Wednesday: EUR/USD = 1.0950

• Your 10,000 EUR is now worth $10,950
• You sell your Euros back
• Profit: $100

What happened?

• The Euro gained strength vs the Dollar
• Each Euro became worth more Dollars
• You profited from that relationship change

Example 2: Selling EUR/USD

What you’re actually doing:

• SELLING Euros (that you don’t even own—broker lends them to you)
• BUYING US Dollars
• Betting that the Euro will WEAKEN vs the Dollar

Real scenario:

Monday: EUR/USD = 1.0850

• You sell 10,000 EUR (you receive $10,850)
• You don’t own Euros—broker lends them to you (this is called “shorting”)

Wednesday: EUR/USD = 1.0750

• Euros are now cheaper!
• You buy back 10,000 EUR for only $10,750
• You return borrowed Euros to broker
• Profit: $100 ($10,850 received – $10,750 paid)

What happened?

• The Euro weakened vs the Dollar
• Each Euro became worth fewer Dollars
• You profited by selling high and buying back low

The Mind-Bending Part: You Profit Whether Markets Go Up OR Down

This is what makes forex different from stocks:

With stocks:

• Buy Apple stock at $150
• Can only profit if it goes UP to $160
• If it goes down, you lose (unless you’re shorting, which is complex)

With forex:

• EUR/USD at 1.0850
• Buy if you think it’ll go UP → Profit
• Sell if you think it’ll go DOWN → Also profit!

Two-way profit potential is forex’s superpower.

Real Example: The Same Currency Can Win AND Lose Simultaneously

This blows minds, but it’s crucial to understand:

Monday scenario:

• EUR/USD = 1.0850 (Euro vs Dollar)
• EUR/GBP = 0.8600 (Euro vs Pound)

You believe:

• Euro will strengthen vs Dollar
• Euro will weaken vs Pound

Your trades:

• BUY EUR/USD (betting Euro UP vs Dollar)
• SELL EUR/GBP (betting Euro DOWN vs Pound)

Wednesday results:

• EUR/USD rises to 1.0950 → Your long trade WINS (+100 pips, +$100)
• EUR/GBP falls to 0.8500 → Your short trade WINS (+100 pips, +$116)

Both trades profitable even though both involved the Euro!

How?

• Euro strengthened vs Dollar (EUR/USD up)
• Euro weakened vs Pound (EUR/GBP down)
• Same currency, different relationships, both profitable

This is why we say: You’re not trading currencies, you’re trading currency RELATIONSHIPS.

Why This Matters for Your Trading:

Common beginner mistake:

Trader thinks: “The US Dollar is going to strengthen today.”

Wrong approach:

• They buy USD/JPY (Dollar vs Yen)
• Ignoring that Yen might be strengthening EVEN MORE
• USD/JPY goes down despite Dollar being strong
• Trade loses

Right approach:

• Dollar strengthening
• But need to know: Strengthening against WHAT?
• Check multiple pairs:
  • EUR/USD falling? (Dollar strong vs Euro) ✓
  • GBP/USD falling? (Dollar strong vs Pound) ✓
  • USD/JPY rising? (Dollar strong vs Yen) ✓
  • USD/CHF rising? (Dollar strong vs Franc) ✓
• Confirmation: Dollar broadly strong
• Now pick the pair showing strongest momentum

Professional traders don’t just trade “the Dollar”—they trade the Dollar’s relationship with the specific currency showing weakness.

The Major Currency Pairs: Your Starting Lineup

There are 180+ currencies in the world, creating thousands of possible pairs. But 7 pairs account for 68% of all forex trading volume.

These are “The Majors”—and as a beginner, you should ONLY trade these until you’re consistently profitable.

EUR/USD – “The Euro” (28% of daily volume)

Full Name: Euro vs US Dollar
Typical Spread: 0.0-0.2 pips (ECN), 0.6-1.0 pips (Standard)
Average Daily Range: 70-100 pips
Best Trading Hours: London/NY session (8am-12pm EST)

Why It’s #1:

• Most liquid pair in the world
• Tightest spreads = lowest cost to trade
• Represents world’s two largest economies (Eurozone + USA)
• Predictable behavior (respects technical analysis well)
• Abundant educational resources (everyone teaches EUR/USD)

What Moves EUR/USD:

1. European Central Bank (ECB) Policy
   • Rate decisions every 6 weeks
   • ECB President Lagarde speeches
   • Inflation data (Eurozone CPI)
2. US Federal Reserve Policy
   • Rate decisions every 6 weeks
   • Fed Chair Powell speeches
   • US employment data (NFP)
   • US inflation data (CPI, PCE)
3. Relative Economic Strength
   • US GDP vs Eurozone GDP
   • US jobs vs Europe jobs
   • Diverging growth expectations

Real Example:

March 2023: Banking Crisis

• Silicon Valley Bank collapses (US)
• Fear of US recession spikes
• Investors flee Dollar, buy Euro
• EUR/USD rallies from 1.0600 to 1.1000 in 2 weeks (+400 pips)
• Dollar weakness = Euro strength

Who Should Trade EUR/USD:

• ✓ Beginners (most forgiving pair)
• ✓ Scalpers (tight spreads)
• ✓ Day traders (good intraday moves)
• ✓ Swing traders (clear trends on daily chart)
• ✓ Anyone learning (most resources available)

GBP/USD – “Cable” (11% of daily volume)

Full Name: British Pound vs US Dollar
Nickname Origin: Originally quoted via transatlantic cable in 1800s
Typical Spread: 0.4-0.8 pips (ECN), 1.2-2.0 pips (Standard)
Average Daily Range: 100-150 pips
Best Trading Hours: London session (3am-10am EST)

Why Traders Love/Hate It:

• HIGH volatility (100-150 pip daily ranges)
• Can move 50-80 pips in minutes on news
• Great for day traders (big movements = big profits)
• Dangerous for beginners (big movements = big losses if not careful)

What Moves GBP/USD:

1. Bank of England (BOE) Policy
   • More reactive than ECB or Fed
   • Governor Bailey speeches move markets
   • UK inflation data (very sensitive)
2. UK Political Drama
   • Brexit fallout (still affects pound in 2024)
   • Prime Minister changes (remember Liz Truss crash?)
   • Scottish independence talks
   • General elections
3. US Dollar Strength (same as EUR/USD)

Real Example:

September 2022: Liz Truss “Mini-Budget”

• New PM announces massive unfunded tax cuts
• Markets panic about UK debt
• GBP/USD crashes from 1.1500 to 1.0350 in 2 weeks (-1,150 pips!)
• Fastest pound collapse in modern history
• Traders who were short made fortunes
• Traders who were long got destroyed

Who Should Trade GBP/USD:

• ✗ Beginners (too volatile, too unpredictable)
• ✓ Experienced day traders (love the volatility)
• ⚠️ Swing traders (can work but needs wider stops)
• ✓ News traders (explosive moves on UK data)
• ⚠️ Scalpers (spreads wider than EUR/USD)

My Recommendation: Avoid GBP/USD for your first 3-6 months. Master EUR/USD first, then graduate to Cable when you can handle the volatility.

USD/JPY – “The Gopher” (13% of daily volume)

Full Name: US Dollar vs Japanese Yen
Typical Spread: 0.1-0.4 pips (ECN), 0.8-1.5 pips (Standard)
Average Daily Range: 60-90 pips
Best Trading Hours: Asian session (7pm-4am EST), London open

Why It’s Different:

• Quoted to 2 decimal places (vs 4 for others)
  • Example: 150.25 (not 1.5025)
  • 1 pip = 0.01 movement
• Strong correlation with stock markets
• “Risk-on / Risk-off” indicator

The Risk Correlation:

Risk-On (Stocks rising, optimism):

• Investors buy risky assets
• USD/JPY rises (Yen weakens)
• Because Yen is “safe haven,” people sell it when confident

Risk-Off (Stocks falling, fear):

• Investors flee to safety
• USD/JPY falls (Yen strengthens)
• Yen becomes shelter during storms

Real Example:

February 2024: S&P 500 hits all-time highs

• Stock market euphoria
• Risk-on environment
• USD/JPY rallies from 148.00 to 151.50 in 2 weeks
• Yen weakness = confidence in markets

vs.

March 2020: COVID crash

• Stock markets collapsing
• Panic everywhere
• USD/JPY plunges from 112.00 to 102.00 in 3 weeks
• Yen strength = fear driving safe-haven flows

What Moves USD/JPY:

1. Bank of Japan (BOJ) Policy
   • Most dovish central bank (keeps rates near zero)
   • Yield Curve Control (YCC) policy
   • Intervention threats when ¥ too weak
   • Governor Ueda’s rare speeches
2. US Treasury Yields
   • When US 10-year yields rise → USD/JPY rises
   • Interest rate differential is KEY
   • Example: US yields 4.5%, Japan yields 0.5% = 4% gap drives flows
3. Risk Sentiment
   • S&P 500 correlation: ~70%
   • VIX (fear index) inverse correlation
   • Global events (wars, crises) = Yen strength

Real Trading Strategy:

Many traders use USD/JPY as a “market thermometer”:

Morning routine:

1. Check S&P 500 futures
2. Check USD/JPY

If both are up: Risk-on day

• Buy commodity currencies (AUD, NZD, CAD)
• Sell safe havens (JPY, CHF)

If both are down: Risk-off day

• Buy safe havens (JPY, CHF, USD)
• Sell commodity currencies

Who Should Trade USD/JPY:

• ✓ Beginners (predictable, decent spreads)
• ✓ Asian session traders (best liquidity during Asia hours)
• ✓ Correlation traders (works well with stock market analysis)
• ✓ Swing traders (clear trends on daily/weekly charts)
• ✓ Carry traders (interest rate differential strategies)

AUD/USD – “The Aussie” (5% of daily volume)

Full Name: Australian Dollar vs US Dollar
Typical Spread: 0.2-0.6 pips (ECN), 1.0-1.8 pips (Standard)
Average Daily Range: 60-90 pips
Best Trading Hours: Asian session (6pm-2am EST), London open

Why It’s Called a “Commodity Currency”:

Australia’s economy depends heavily on:

• Iron ore (23% of exports → mostly to China)
• Coal (15% of exports)
• Gold (6% of exports)
• Natural gas (7% of exports)

**When commodity prices rise → AUD strengthens