The foreign exchange market also known as forex or the FX market is the world’s most traded market, with turnover of $5.1 trillion per day*
To put this into perspective, the U.S. stock market trades around $226 billion a day; quite a large sum, but only a fraction of what forex trades.
Forex is traded 24 hours a day, 5 days a week across by banks, institutions and individual traders worldwide. Unlike other financial markets, there is no centralized marketplace for forex, currencies trade over the counter in whatever market is open at that time.
How FX Trading works
Trading forex involves the buying of one currency and simultaneous selling of another. In forex, traders attempt to profit by buying and selling currencies by actively speculating on the direction currencies are likely to take in the future.
Typically referred to as “The Majors”, these seven currency pairs make up almost 80% of total daily trading volume*. As you’ll see in the table below, the major currency pairs all include the U.S. Dollar (USD).
While the major currency pairs make up the majority of the market, you shouldn’t ignore the minors – also referred to as Cross Currency Pairs. The minor currency pairs account for all the other combination of major markets such as; EUR/GBP, EUR/CHF and GBP/JPY.