What is Forex?
Forex is essentially a global financial market where different currencies are bought and sold.
If you believe that one currency will strengthen against another and your prediction turns out to be correct, you can make a profit.
There was a time when people used to travel easily by airplane to different countries.
If you have ever traveled abroad, you must have looked for a currency exchange booth at the airport to convert your money into the currency of the country you were visiting.
Forex Exchange
At the currency exchange counter, you see a screen displaying exchange rates for different currencies.
The exchange rate means how much one currency is worth compared to another.
For example, if you see “Japanese Yen” and think,
“Wow! One dollar equals 100 yen? And I have 10 dollars! I’m rich!”
Then you have actually participated in the forex market! You sold one currency to buy another.
The Reality of the Currency Market
The forex market is the largest financial market in the world.
It is a decentralized market where currencies from all over the world are bought and sold.
Central banks, financial institutions, companies, hedge funds, and individual traders participate in this market, causing exchange rates to change every second.
Some people believe that forex trading volume is $7.5 trillion per day, but in reality, the spot forex market (which is important for regular traders) is only around $2 trillion daily.
Additionally, retail traders (ordinary individuals) make up only 3-5% of the total forex market, meaning about $200-300 billion is traded daily by them.
So, while the forex market is indeed huge, it’s not as massive as some claim!
Forex Market is Open 24 Hours
The forex market operates 24 hours a day, 5 days a week, and is only closed on weekends.
It shifts globally across different financial centers, including New Zealand, Australia, Singapore, Hong Kong, Tokyo, Frankfurt, London, and New York.