What Is Forex? Estimated reading: 2 minutes 52 views Forex (Foreign Exchange or FX) is the global currency market, where participants buy and sell currencies. It is the largest financial market, with a daily trading volume exceeding $5 trillion.Brief History of ForexBefore 1971 – The Bretton Woods Agreement fixed exchange rates to the U.S. dollar, which was pegged to gold.1971-1973 – The U.S. ended the gold standard, leading to floating exchange rates.1980s – Advancements in technology enabled global, 24-hour currency trading, making London the financial hub of forex.How Forex Trading WorksForex trading involves the simultaneous buying of one currency and selling of another in currency pairs (e.g., EUR/USD). The first currency in the pair is the base currency, and the second is the quote currency.Major Traded Currencies (“The Majors”)The most traded currencies include:USD (U.S. Dollar)EUR (Euro)JPY (Japanese Yen)GBP (British Pound)CHF (Swiss Franc)AUD (Australian Dollar)CAD (Canadian Dollar)NZD (New Zealand Dollar)Who Trades in the Forex Market?Key participants include:Central & Commercial Banks – Influence exchange rates through monetary policies.Global Corporations – Conduct international trade and hedge currency risks.Institutional Investors – Hedge funds, pension funds, and investment firms.Forex Brokers – Provide market access for retail traders.Retail Traders – Individual investors speculating on currency price movements.How Forex Brokers WorkBrokers act as intermediaries between traders and the interbank market, sourcing currency prices from multiple banks. They offer trading platforms that allow traders to execute trades in real-time.Key Features of the Forex MarketDecentralized & Global – No central exchange, operates via an Electronic Communication Network (ECN).24-Hour Trading – Open 5 days a week across different time zones.High Liquidity – Trillions traded daily, ensuring seamless order execution.Forex trading plays a vital role in global finance, facilitating international trade and investment.
