The Foreign Exchange market, also known as "Forex" or "FX" market is the largest financial market in the world with no rivals in the volume of daily trades entered by traders around the world; it's so big that with a daily average turnover greater than US$1 trillion it's 30 times larger than the combined volume of all U.S. equity markets.
Among the many reasons that people finds to enter the Forex market, there are two that stand up above the others. It is known that approx. 5% of the daily turnover in the FX market is from companies and governments that buy or sell products and services in a foreign country or have to convert profits made in foreign currencies into their domestic currency. But the other 95% of the trades are made for profit by professional Forex traders.
"Foreign Exchange" is, in short, the simultaneous buying of one currency and selling of another. These two currencies are arranged and traded in pairs; for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).
Forex traders find the best trading opportunities in the most commonly traded (and therefore most liquid) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of these currencies, which include the US Dollar, Euro, Japanese Yen, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.
Considered a real 24-hour market, Forex trading begins each day in Australia, and moves around the globe as the working day begins in each financial center, continuing to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.
The FX market is considered an Over The Counter (OTC) or 'interbank' market, considering the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.