What is Forex Trading?
Quick Answer: Forex (Foreign Exchange) is the global marketplace for trading currencies. It is the largest financial market with over $7 trillion traded daily, operating 24/5 with no central exchange.
What is the Forex Market?
The foreign exchange (forex) market is the global marketplace for trading national currencies. It operates 24 hours a day, five days a week, connecting banks, hedge funds, corporations, and retail traders who buy and sell currency pairs like EUR/USD or GBP/JPY. With daily turnover above $6 trillion, forex is the most liquid financial market in the world.
Key Features of Forex
- Decentralized: Trading occurs over-the-counter via electronic networks rather than a single exchange.
- Pairs: Every trade involves buying one currency and selling another simultaneously.
- Leverage: Brokers provide leverage so traders can control large notional values with modest capital.
- Round-the-clock sessions: Liquidity follows the Asian, European, and North American trading sessions.
Why Forex Matters
Currencies reflect the economic health of countries. Trading forex provides exposure to interest-rate differentials, geopolitical events, and risk sentiment.
Who Participates?
- Banks and liquidity providers: Quote prices and facilitate large flows.
- Corporations: Hedge currency risk tied to international commerce.
- Governments and central banks: Manage reserves and stabilize exchange rates.
- Retail traders: Speculate on short-term moves or longer-term trends.
Related Terms
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