Forex is the most active market in the world: it’s open 24 hours a day, five days a week, with major currencies constantly traded between lots of different players. Unlike stocks or bonds, that liquidity offers quick trades no matter when you log on.

Forex trading also offers massive “leverage”: borrowing money in order to magnify your gains, or indeed your losses. Many people active in the currency markets buy with money they’ve borrowed, hoping for fat returns. In some countries, “spread betting” is a tax-free method of leveraged trading – but that comes with risks (more on those later).

Forex can be a gambler’s game of choice for speculative short-term bets on exchange rates or long-haul gambits on a nation’s success or downfall. For example, if the American economy is set to slow, that’d probably mean a stumbling dollar. Your Yankee currency might be better off swapped for, say, Japanese yen for a while.

What if I’m not feeling lucky? Forex might not be a money maker – but it could be a money saver.

Any investments outside of your home country expose you to currency risk. A Brit investing in US stocks would see any gains denominated in dollars. But when that money comes home, you’ve got to convert it back into pounds – and a weakening dollar could leave you tarred and feathered.

Forex trading lets you “hedge,” or mitigate, that risk. So-called forwards let you lock in a future exchange rate, while options give you the right, but not the obligation, to use an exchange rate agreed now at a date in the future. You can activate the option if the exchange rate moves in your favor, or just let it expire if not.

A Brit could also bet against the pound to win whichever way the currency moves: either the pound falls and it’s payday on the bet, or else the pounds in their pocket simply increase in value. More on how to pull this off soon.

Knowing about currency trading is essential for any investor – but that doesn’t mean it’s without risk.