Written by Robert McKinley

What Is Forex?

The Foreign Exchange Market (FOREX)

First, the name "FOREX" is an acronym for Foreign Exchange. The Foreign Exchange Market is also referred to as “Forex“, "FX”, “Spot FX”, and just plain old “Spot.”

But what is Forex trading?

Forex trading is the trading of national currencies. In other words, money is traded. The trading is done in the Foreign Exchange Market (FOREX). The currencies are traded in pairs. Traders simultaneously buy one currency and sell another. For example, a trader may buy US dollars and sell the Euro (USD/EUR).

While there are many factors that affect the value of a nation’s currency, it's value is greatly affected by how the FOREX market perceives the health of a nation's economy compared to the economies of other nations. Therefore, a Forex trader's first job is to try to predict whether a particular currency will increase or decrease in value—not unlike what stock market traders do regarding the future value of a stock. So, essentially, if you buy Pounds (GBP) you are buying shares in the future health—good or bad—of the British economy.

It is a big market - real big

FOREX trading has created the largest financial market in the world, with a volume of about $4 trillion a day—give or take a billion or so. For proper perspective, the daily volume of the New York Stock Exchange is $25 billion. In fact, daily FOREX trading volume is three times the total volume of the stock market and the futures market combined.

Before the advent of the Internet, FOREX trading was the exclusive domain of the "big players." Only banks and other large financial institutions with millions of dollars to "play" with could qualify. But now, the Internet has made it available to everyday people and we can trade with very little money through online FOREX trading firms—brokers and dealers. If you have a computer, a high-speed Internet connection, and a little money to "play" with, you can become a FOREX trader.

The FOREX market has no central headquarters. It is an Over-The-Counter (OTC) market without a central physical location or exchange. It exists and is continuously implemented 24 hours a day, five days a week through a worldwide electronic network of banks .

Which Currencies Are Traded?

Forex currency symbols have three letters. The first two letters identify the name of the country and the third letter identifies the name of that country’s currency. (Since the Euro currency is used in more than one country, the EUR symbol is an exception to this rule.)

The most popular currencies with their symbols and nicknames are:

Symbol	Country	Currency	Nickname
USD	United States	Dollar	Buck
EUR	Euro members	Euro	Fiber
JPY	Japan	Yen	Yen
GBP	Great Britain	Pound	Cable
CHF	Switzerland	Franc	Swissy
CAD	Canada	Dollar	Loonie
AUD	Australia	Dollar	Aussie
NZD	New Zealand	Dollar	Kiwi

(You can find a more complete list of international currency symbols here.)

The FOREX market is almost always open

With the exception of brief periods during the weekend, the market is always open somewhere in the world—day and night.

Time Zone	New York	GMT
Tokyo Open	7:00 PM	0:00
Tokyo Close	4:00 AM	9:00
London Open	3:00 AM	8:00
London Close	12:00 PM	17:00
New York Open	8:00 AM	13:00
New York Close	5:00 PM	22:00

Below, you can see which currencies are traded most and least:

Because of the huge volume of daily trading, the FX (FOREX) market is the most liquid and efficient financial market in the world. Also because of the trading volume, it is virtually impossible for an individual or an organization to influence the exchange rate of the more commonly-traded currencies through open market operations.

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