Forex Beginners - The Definition of Forex

The forex market, also known as the foreign exchange or the fx market, is the place where currencies are traded. It is the largest, most liquid market in the world with an average traded value of over 4 trillion per day and includes all of the currencies in the world.

Compare that to the $25 billion per day that the New York Stock Exchange trades and you can easily see how enormous the forex market really is. It actually equates to more than 3 times the total amount of stocks and futures markets combined. Forex is tremendous!

What exactly is traded on the forex market you ask? The simple answer is money. It is the simultaneous buying of one currency and the selling of another. The Forex market is the place where U.S. dollars, Euros, Yen and other major currencies are bought and sold. Currencies are traded through a broker and are always traded in pairs - for example, the euro and the US dollar pair (EUR/USD) or The British Pound and the Japanese Yen pair (GBP/JPY).

Confused? Think of it as buying a traditional 'share' in a particular country. Let's say you buy British Pound, you are essentially buying a share in the British economy as the price of the GBP is a direct reflection of what the market thinks about not only the current, but future health of the British economy.

Forex trading among private investors is still relatively new. The market once operated almost exclusively between government (central) banks and commercial banks until advances in communication, such as the Internet and PC banking, allowed speculators easier access to the market.

The major players involved in these trades are Banks, Governments, Speculators, Corporations and Other, related financial markets and institutions (e.g., brokers).

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