For ordinary person not engaged in Forex trading, it is
very easy to explain the definition of Forex with an example
of travelling to different countries. When arriving
at one country, the first thing to do for a visitor is to exchange
the money of his/her country with the currency
of the particular country. This process is itself participation
in Forex market- exchange one currency for another.
The term Forex stands for the Foreign Exchange and can
be defined as an international currency market. Forex is
very unique in its essence because it is everywhere neglecting
the factor of time zone and geography. In contrast
to other physical markets, where monopoly can
exist, in Forex market despite the very different market
participants, there is no any dominance, and the market
remains out of any control.
A question may arise: what is exchanged on Forex? The
answer may be quite surprising for you: absolutely “nothing”.
All the instruments, including the most popular
currencies are not physically exchanged on the foreign
exchange market. Market participants just conclude a
bet among each other on the currency changes, leaving
a margin hundreds times less than the volumes of this
betting, and later one participant pays another the sum
of the gain (such scheme is known as a margin trading).
The rate of the currency is always changing, fluctuates,
and this happens because of different factors. Due to
these fluctuations it becomes possible to make a profit
from speculative trades. Foreign Exchange is the World’s
largest and most active market. It operates every day except
the weekends, and its volume reaches up to $5 trillion
a day and surely, the volume is different for various
participants.
