"The foreign exchange market (forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies."
The marketplace where different global currencies are bought and sold.
Currency pairs: Understanding the different types of currency pairs, and how they are traded in the forex market.
Exchange rates: Understanding how exchange rates are determined, and how they fluctuate over time.
Trading strategies: Learning about the different trading strategies used in the forex market, such as technical analysis, fundamental analysis, and price action trading.
Market participants: Understanding the different types of market participants in the forex market, such as banks, hedge funds, and retail traders.
Trading platforms: Becoming familiar with the different trading platforms used in the forex market, and how they are used.
Economic indicators: Learning about the economic indicators that influence currency prices, such as GDP, inflation, and unemployment.
Risk management: Understanding the importance of risk management in forex trading, and how to implement strategies to minimize risk.
Chart patterns: Learning how to read chart patterns and identify market trends, such as bullish and bearish trends.
Trading psychology: Understanding the importance of trading psychology in successful forex trading, and how to develop a disciplined and focused mindset.
News and events: Staying up-to-date on news and events that impact currency prices, such as central bank announcements, geopolitical events, and economic reports.
Spot Market: A market where currencies are traded for immediate delivery. Settlement takes place within two business days.
Forward Market: A market where currencies are traded for future delivery at a fixed price. The settlement date can range from a few days to as long as three years.
Futures Market: Similar to the forward market, but transactions take place through a centralized exchange instead of between two parties. Futures contracts have standardized terms and are traded in large volumes.
Options Market: A market where participants buy and sell options on various currencies. Options provide the holder with the right, but not the obligation, to buy or sell currencies at a specific price on or before a certain date.
Swap Market: A market where participants exchange one currency for another for a set period of time, with the agreement to reverse the exchange at a later date. Swaps are often used to hedge against currency fluctuations.
Interbank Market: A market where banks and financial institutions trade currencies with each other. This market is usually only accessible to large institutions with significant trading volumes.
Retail Market: The market where individuals and small businesses buy and sell currencies for personal or business use. Retail transactions are generally smaller and less complex than those in the interbank market.
Electronic Communication Network (ECN) Market: A platform that allows market participants to interact anonymously and execute trades electronically. This market provides transparent pricing information and can offer faster transaction speeds compared to other markets.
Over-The-Counter (OTC) Market: A market where currencies are traded directly between two parties without the oversight of an exchange. This market can offer more customized terms and greater flexibility, but it also carries higher counterparty risk.
"This market determines foreign exchange rates for every currency."
"The main participants in this market are the larger international banks."
"Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends."
"The foreign exchange market does not set a currency's absolute value but rather determines its relative value by setting the market price of one currency if paid for with another."
"Banks turn to a smaller number of financial firms known as 'dealers,' who are involved in large quantities of foreign exchange trading."
"Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the 'interbank market.'"
"The foreign exchange market assists international trade and investments by enabling currency conversion."
"The modern foreign exchange market began forming during the 1970s. This followed three decades of government restrictions on foreign exchange transactions under the Bretton Woods system of monetary management."
- Huge trading volume and high liquidity - Geographical dispersion - Continuous operation, except for weekends - Variety of factors affecting exchange rates - Low relative profit margins compared to other fixed-income markets - Use of leverage for profit and loss margins "[...] its huge trading volume, representing the largest asset class in the world leading to high liquidity; its geographical dispersion; its continuous operation: 24 hours a day except for weekends, i.e., trading from 22:00 UTC on Sunday (Sydney) until 22:00 UTC Friday (New York); the variety of factors that affect exchange rates; the low margins of relative profit compared with other markets of fixed income; and the use of leverage to enhance profit and loss margins and with respect to account size."
"According to the Bank for International Settlements, the preliminary global results from the 2022 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity show that trading in foreign exchange markets averaged US$7.5 trillion per day in April 2022."
"Measured by value, foreign exchange swaps were traded more than any other instrument in April 2022, at US$3.8 trillion per day."
"$2.1 trillion in spot transactions"
"$1.2 trillion in outright forwards"
"$124 billion currency swaps"
"$304 billion in options and other products"