The Foreign Exchange market (frequently known as forex trading or the forex market) is the largest financial market in the world, with well over $1.5 trillion changing hands every day.

This enormous amount of money is larger than all US equity and Treasury markets put together!

In contrast to other financial markets that function from a central location (a stock exchange, for instance), the worldwide Forex market has no central location. It is a global electronic web of banks, financial institutions and individual traders, all involved in the buying and selling foreign currencies.

Another significant feature of the Foreign Exchange market is that it works 24 hours a day, corresponding to the closing and opening of financial centers in countries all across the modern world, starting each day in Sydney, then Tokyo, London and New York. At any time, in any place, there are buyers and sellers, making the FX markets the most liquid market worldwide.

Customarily, access to the FX markets have been made available only to banks and other large financial institutions. With advances in technical know-how over the years, however, the FX is now available to everybody, from traditional financial institutions and banks to money managers to individual traders trading retail accounts.

The FX markets are very different than buying and selling foreign currencies on the futures market and a lot easier than trading stocks and commodities.

Whether you are understanding of it or not, you definitely play a role in the Forex market. The plain fact that you have money in your purse makes you an investor in currency, particularly in the dollar (USD). By holding US Dollars, you have elected not to hold the currencies of other states. Your purchases of stocks, bonds or futures, along with funds put in your bank account, represent investments that depend heavily on the integrity of the value of their nominated currency: for example, the US dollar.

Due to the shifting value of the US dollar and the resulting fluctuations in exchange rates, your investments may shift in value, affecting your overall financial position. With this in mind, it should be no surprise that many investors have taken advantage of the fluctuation in Exchange Rates, using the changeability of the Foreign Exchange market as a way to increase their capital.

Example: suppose you had $1000 and bought Euro when the exchange rate was 1.50 Euros (EUR) to the Dollar. You would then have 1500 Euros (EUR) . If the value of Euros (EUR) against the Dollar (USD) increased then you would exchange (sell) your Euro for Dollars (USD) and have more US dollars than you started with.

For example you might see the following:

EUR/USD last trade 1.5000 means
1 Euro is worth $1.50 US dollars.

The first currency (in this example, the EUR) is called the base currency and the second, the USD as the counter or quote currency.

The FX markets must exist so a country like France can sell products in the United States and be able to receive Euros in exchange for US dollars.

The Forex market plays a vital role in the modern world economy and there will always be a vital need for the buying and selling foreign currencies. International trade increases as technology and communication increases. As long as there is international trade, there will be a Foreign Exchange market.

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