FOREX is an inter-bank market that was started in 1971 when global trade started to move from fixed exchange rates to floating market rates. It is a collection of purchases, executed between FOREX market representatives, that involve exchange of money between two countries with units of currencies, carried out at a predetermined rate of exchange. The currency exchange rate used in these transactions is determined by supply and demand patterns.
In the FOREX market, one currency is always strengthening against another, and therefore, one currency is always weakening against another. Because of this, you have equal opportunity to buy or sell to enter the market.
With approximately $4 trillion USD traded in the market every day, the FOREX market has the highest liquidity in the world. Basically, this means that one can buy almost any currency he wishes in high volumes while the market is open. The FOREX market is open 24 hours, 5 days a week – Monday to Friday. Trading begins with the opening of the market in Australia, Asia, Europe to follow and then the USA until the markets close.
There are hundreds of currencies in the world, and each has a three letter symbol on exchange. American Dollars are represented in USD, Euros in EUR, Swiss Francs in CHF and British Pounds in GBP.
These currencies can be of two types including major currencies and minor currencies. The major currencies are derived from the most powerful economies around the globe like US, Japan, the UK, the Euro Zone, Canada, Australia, Switzerland and New Zealand. These currencies combined with the minor currencies create forex pairs.