What is Forex?

Forex (FX) is the market in which currencies are traded. The forex market is the largest, most liquid market in the world, with average traded values that can be trillions of dollars per day. It includes all of the currencies in the world.

The aim of forex trading is simple. Just like any other form of speculation, you want to buy a currency at one price and sell it at higher price (or sell a currency at one price and buy it at a lower price) in order to make a profit.

Some confusion can arise as the price of one currency is always, of course, determined in another currency. For instance, the price of one British pound could be measured as, say, two US dollars, if the exchange rate between GBP and USD is 2 exactly.

In forex trading terms this value for the British pound would be represented as a price of 2.0000 for the forex pair GBP/USD. Currencies are grouped into pairs to show the exchange rate between the two currencies; in other words, the price of the first currency in the second currency.

How to Trade in the Forex Market?

The market is open 24 hours a day, five days a week across major financial centers across the globe. This means that you can buy or sell currencies at any time during the day.

The foreign exchange market isn't exactly a one-stop shop. There are a whole variety of different avenues that an investor can go through in order to execute forex trades. You can go through different dealers or through different financial centers, which use a host of electronic networks.