The Foreign Exchange market (also referred to as Forex or the FX market) is the largest financial market in the world, with upwards of $1.5 trillion changing hands every day.

This monumental sum of money is greater than all US equity and Treasury markets together!

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

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

Traditionally, access to the Foreign Exchange markets have been made available only to banks and other large financial institutions. With advances in technology over the years, however, the FX markets are now available to everybody, from banks and financial institutions to money managers to private traders trading retail accounts.

The Foreign Exchange market is very different than buying and selling foreign currencies on the futures market and a lot easier than trading stocks or commodities.

Whether you are aware of it or not, you already play a role in the Foreign Exchange markets. The simple fact that you have money in your pocket makes you an investor in currency, particularly in the dollar (USD). By holding Dollars (USD), you have chosen not to hold the currencies of other nations. Your purchases of stocks, bonds or options, along with money put in your bank account, represent investments that depend heavily on the solidity of the value of their chosen currency: for instance, the dollar.

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

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

The Forex market must exist so a country like Germany can sell products in the United States and be able to receive Euros in exchange for dollars (USD).

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