Definition of the Forex Market

The Forex market, also known as the foreign exchange market, FX market, or currency market, is a decentralized global marketplace where participants trade currencies. It is considered the largest and most liquid financial market in the world.

In the Forex market, currencies are traded against each other. Traders, including financial institutions, banks, corporations, governments, speculators, and individual investors, engage in buying and selling currencies with the aim of profiting from fluctuations in exchange rates.

The primary purpose of the Forex market is to facilitate international trade and investment by enabling businesses to convert one currency into another. For instance, a multinational corporation may need to exchange currencies to pay for goods or services in a foreign country. Additionally, Forex trading offers opportunities for speculation, where traders aim to profit from changes in currency values.

Transactions in the Forex market occur over-the-counter (OTC), meaning they take place directly between parties involved in the trade through electronic networks, such as the interbank market, without a centralized exchange. The market operates 24 hours a day, five days a week, across major financial centers worldwide, allowing for continuous trading and reacting to global events impacting currency values.