Forex Trading as commonly called stands for Foreign Exchange Trading. It is biggest financial trading market in the world having a daily turnover in excess of US$1 Trillion. The figure signifies a volume amounting to about 28 times the combined volume of all US equity trading markets.
Forex Trading means buying of one foreign currency by paying in another. Each transaction involves a purchase and a sale of currency at the same time, since currency trading is always done in pairs for example USD/EUR or USD/GBP etc.
Foreign Currency trading or Forex Trading is undertaken for two purposes. About 5-7% of the transactions are undertaken by institutions that do business in foreign lands or companies that have to convert their foreign currency earnings into domestic currency. The rest of the Forex Trading is done purely on speculative basis with profit objectives.
For trading by speculation purposes, the best profit making opportunity lies in most traded currencies (obviously the currencies of most economically advanced countries) also called the “majors” in Forex Trading parlance. They consist of US Dollar, GB Pounds, Japanese Yen, European Unions EURO, Swiss Franc, Canadian Dollar, Australian Dollar etc.
The Forex Trading market is a 24 hour market, beginning at Sydney sunrise and opening markets westward as the sun rises, Tokyo, London, New York in that order. This facilitates investors around the globe to respond immediately to value fluctuations of their holdings caused by political, economic or social events occurring around the world, be it day or night.
The Forex Trading market does not operate through any offices or exchanges as in case of other financial markets. It is considered OTC (over the counter) or ‘interbank’ market since the trade is conducted between parties over the telephonic or electronic network only. Forex Trading is the biggest financial volume business but happens behind the curtains with complete transparency
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