The Foreign Exchange market (frequently referred to as Forex or the forex market) is the richest financial market in the world, with well over $1.5 trillion changing hands daily.

This substantial amount of money is bigger than all US equity and Treasury markets put together!

Contrasting with other financial markets that operate at a central place (a stock exchange, for instance), the worldwide Forex market has no base location. It is a worldwide electronic web of banks, financial institutions and personal traders, all involved in the buying and selling foreign currencies.

Another significant feature of the FX is that it operates 24 hours a day, corresponding to the closing and opening of financial centers in different places all across the globe, beginning each and every day in Sydney, then Tokyo, London and New York. At any time, in any place, there are sellers and buyers, making the FX markets the most liquid market world-wide.

Traditionally, access to the FX markets have been made available only to banks and other significant financial institutions. With advances in technical know-how over the years, however, the Forex markets are now available to anyboby, from traditional financial institutions and banks to money managers to any 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 commodities or stocks.

Whether you are aware of it or not, you definitely play a role in the FX markets. The innocent fact that you have money in your wallet makes you an investor in currency, particularly in the US dollar. By holding US Dollars, you have chosen not to hold the currencies of other states. Your purchases of stocks, bonds or other investments, along with money put in your bank account, reflect investments that lean heavily on the solidity of the worth of their nominated currency: eg., the US dollar.

Due to the changing value of the dollar (USD) and the resulting fluctuations in exchange rates, your investments may vary in value, affecting your over-all financial perspective. With this in mind, it should be no wonder that many investors have taken advantage of the variability 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 Euros when the exchange rate was 1.50 Euros (EUR) to the Dollar (USD). You would then have 1500 Euro . If the value of Euros (EUR) against the US Dollar increased then you would exchange (sell) your Euros for US Dollars and have more US dollars than you began 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 euro) is referred to as the base currency and the second, the USD as the quote or counter currency.

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

The FX plays a vital role in the modern world economy and there will always be a tremendous 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 Forex market.

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