What is Forex?

The foreign exchange market (Currency, Forex, or FX) market is where currency trading takes place. The foreign exchange market that we see today started evolving during the 1970s when world over countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another.

The purpose of FX market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, etc., and the need for trading in such currencies.

Presently Forex market is a global telecommunication network of banks and different financial organizations. It does not have any fixed trading place and time restrictions – the trade starts on Monday morning in New Zealand and closes on Friday evening in USA

The Spot Forex Market is a 24-hour international market where banks, hedge funds, international corporations, and individuals from all over the world are active participants. The sheer scope of market participation and volume of activity insures around-the-clock activity making this an ideal market for trading at all times.

The foreign exchange market (also called forex or FX) is the largest asset class in the world, with a global trading volume of more than $2 trillion per day, Hawkins said. “It’s a market of both exchange and speculation on currency prices.” The forex market is 10 to 15 times the size of the bond market and 50 times the size of the equities market.
Retail investors make up maybe 1 to 2 percent of the total volume traded on the market…. The major players are large banks, multinational corporations, anyone from Toyota and Honda doing large transactions to both offset their currency exposures as well as actually transfer funds from continent to continent.”
Because the market is global, trades are happening 24 hours a day, seven days a week. Constant trading makes for a liquid, volatile market.

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