What is Forex?

FOREX — the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.

Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a small part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate stock prices. Currency traders try to take advantage of small fluctuations in exchange rates.

Exchange rate fluctuations are caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly and most everyone in the world receives the same news about the same time.

Currencies are traded against one another. Each pair of currencies constitutes an individual product.

Unlike stocks and futures exchange, foreign exchange is an interbank, over-the-counter (OTC) market which means there are no single universal exchange for specific currency pairs. The foreign exchange market operates 24 hours per day throughout the week between individuals with Forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets. Average daily international foreign exchange trading volume was $5.3 trillion in April 2013 according to the BIS triennial report.