For many the term forex may be unfamiliar. Well, forex is a shorthand form of Foreign Exchange trading. A Foreign Exchange market occurs when one currency is traded for another. Forex or foreign exchange is the most common form of monetary trade and is the largest trading market in the world basely sold on the value of the currency traded. Banks, international corporations, governments, among others partake in the forex market. According to a study conducted by the Bank for International Settlements or BIS, the total daily trading value in the foreign exchange market is almost $1.9 trillion.

There are hundreds of trading centres where foreign exchange trading occurs; however, many of the main trading centres are located in London, Tokyo, New York and in many other major cities and countries throughout the world. Currently, the most commonly traded currencies in the foreign exchange market is the US dollar, the Euro, and the Japanese Yen. Trading in the foreign exchange market is based upon the economies of the countries of which the currency is being traded. As the economy of a country strengthens, the value of the currency in the global market increases. Hence, the principle behind foreign exchange trading is to trade to obtain currencies of countries with strong or steadily improving economies so that the value of the currency will gain value in the international market in future years.

Currently, banks conduct the majority of the exchange that goes on in the foreign exchange market as many large banks trade up to a billion dollars a day in the market. A small portion of this money may be traded on behalf of the bank’s customers, but the majority of the trading conducted in the forex market by banks is done for its own account. The Forex market truly is a unique market.