Foreign Exchange, also known as Forex or FX, is the buying and selling of different foreign currencies. Since you're using one currency to buy another, buying and selling happen in the same transaction. The foreign exchange market is the largest market in the world. Over 4 trillion US Dollars are traded daily in global foreign exchange markets.

Forex trading includes transactions between governments, central banks, large and small banks, central banks, and currency speculators. More than half of foreign exchange trade volume is between large banking institutions. Large businesses often engage in forex trading also, usually in order to buy goods and services and pay employees in different countries. Increasingly (though still accounting for a very small percentage of the volume of foreign exchange trades) forex trading is being done by independent investors who are working through retail brokers.

The foreign exchange market is unlike other markets in many ways. The staggering volume of the trading that happens in the forex market has already been mentioned. Forex is also the most liquid market, meaning that investments can quickly and without expense be turned into cash, as they already are currency. The forex market is broadly geographically – all nations have currency and currency traders. An especially important difference between the forex market and other markets is that forex is actively traded 24 hours a day, 5 days a week. This can make the market especially appealing to the new class of individual home-based traders, who can be active in the market at any time of the day or night that they choose.

Source by Walter Roberts