Forex is short form for foreign exchange. It refers to the market where various currencies in the world are exchanged with each other. In the forex market, you will find the Euro, US dollar, British Sterling Pound, Japanese Yen, Indian Rupee and South African Rand among other currencies.
Forex trading is so far the most liquid market in the world. This is because people always need to exchange one currency for the other. Importers for example need to pay for the goods they are importing in the currency of the country that is supplying them with the goods, they will therefore have to exchange their domestic currency into the currency of the other country when paying for the goods. People who are employed by foreign organisations may also need to exchange currencies in case their organisation is not paying them salaries in the form of their home currencies. In addition, people who travel to other countries for purposes such as business or tourism also need to exchange currencies.
Forex trading has no central control unit or headquarters. It is a business that is conducted over the counter by financial institutions, central banks, corporations and even individuals. There are also online forex market brokers.
“The lack of a central control unit therefore means that very little supervision is involved in the forex market.”
Away from the players in this market, forex trading is a market which is worth trillions of money. In a given day, an average of over $1.9 trillion is estimated to be traded in the forex market.
Forex market operates 24 hours a day. It is open all the days of the week except during weekends. Forex market allows one to buy and sell currencies. It also allows one access to margin trading and connects traders to the international markets.
Some of main market interbank forex players are:
- Royal Bank of Scotland
- Bank of America
- Deutsche Bank