The word "forex" stands for foreign exchange, and is one of the biggest trading markets in the world, with upwards of $1 trillion dollars being traded daily. With that said, how does the forex market work?
The foreign exchange market is a bit like the stock market, except instead of buying and selling shares, you're buying and selling currencies. In the stock market, traders buy shares in a particular company, hoping that company will prosper. As it does, the value of the traders shares increase, which they can sell at a profit.
In the forex market, when a trader buys the currency of a particular country, they're essentially investing in its economy. If the economy of the target country is healthy, the value of the currency goes up, resulting in profit. The main currencies that are traded are United States Dollar, Euros, Great British Pound and Japanese Yen, with currencies being trading in pairs (for instance, buying USD and selling GBP).
The forex market is run electronically through telecommunications links in data-centres in every country. As such, unlike the stock market, the forex market runs 24 hours a day, from 12AM GMT on Monday till 10PM GMT on Friday. Because of this, traders can do their trading at a time that suits them.
Until recently, only huge companies had the capital to trade forex, but with the coming of the 21st century and faster internet speeds, it is now possible to trade from your home computer with an investment of as little as $100.
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