Forex trading is conducted in the foreign exchange market, otherwise referred to as the forex or FX market. This is the largest financial market in the world, with an estimated daily average turnover well in excess of US$1 trillion. A foreign exchange rate is the relationship between two currencies, which means the amount of one currency that would be required to buy (or sell) one unit of another currency. Currencies are quoted in pairs, e.g. Euro/US$ = EUR/USD, US$/Japanese Yen = USD/JPY, etc. Forex trading involves a foreign exchange transaction, defined as the simultaneous buying of one currency and selling of another currency.
The foreign exchange market entered a new phase in 1971 when the Bretton Woods accord, which was characterized by fixed forex trading rates, was abandoned. This led to a new forex trading system of floating rates and opened a new world in foreign exchange.
Forex trading is said to be a 24-hour, 5 day a week market, starting each day in Wellington, NZ and then moving around the globe as the business day commences in the next financial center. This rotation includes Tokyo , London , and New York . This allows foreign exchange market participants to react to news, whether it be economic political or social, 24 hours per day. Unlike other markets, such as stocks or futures, forex trading does not involve a central exchange and is considered to be an over the counter market known as the interbank market. Most forex transactions are conducted between two counterparties via the telephone or over an electronic network, such as the internet.
