Foreign exchange, also known as forex or FX for short is a market that is focused on the exchange of the world’s various currencies. It is known as one of the most thrilling and fast-paced markets around. Until today, the market has been made exclusive to central banks, corporations, wealthy individuals who could afford to participate, and large financial institutions, but this all took a different turn with the birth of the internet.
Unbeknownst to people, currencies play a vital role in their everyday lives. Prior to conducting businesses or trades with foreign countries, one must first have their currency exchanged in order from them to be accommodated. Example, if you are someone from Europe and would like to purchase something from the U.S., either you or the company who purchases the item has to pay in U.S. dollars, meaning that the European importer will have to exchange the same value of euros into U.S dollars. The same can be said for foreigners, you cannot pay with the currency you have in hand, and you will need to have them exchanged for the locally accepted currency.
Why is it so large?
The very fact that we need to exchange currencies is the very reason why the forex market is known as the world’s largest market, large enough to make all other markets, even the stock market, look like dwarves.
What makes forex market unique is the lack of a central marketplace. Instead of having a central marketplace like the others, currency trading is done electronically or over-the-counter (OTC), meaning that all transactions happen via the internet between various traders around the world.
The market is available 24 hours a day, five and a half days a week. Currencies are traded in the world’s major financial sectors such as Frankfurt, Hong Kong, London, New York, Paris, Sydney, and Zurich – across all possible time zones.