Forex, also known as foreign exchange or FX, is the global marketplace where currencies are traded. It is the largest and most liquid financial market, with a daily trading volume exceeding $7.5 trillion.
Why Does Forex Matter?
Forex plays a crucial role in international trade and investment. Whenever you exchange your local currency to travel abroad, you’re participating in the forex market.
Example: If you exchange $1,000 to Japanese yen when the rate is 1 USD = 100 JPY, and later exchange it back when the rate is 1 USD = 110 JPY, you’ve made a profit from the exchange rate difference.
Forex vs Other Financial Markets
| Market | Daily Volume |
| Forex Market | $7.5 trillion |
| New York Stock Exchange | $20 billion |
| Cryptocurrency Market | ~$100 billion |
The forex market is over 200x larger than the NYSE. However, only about $200–300 billion per day comes from retail traders like us.
How Forex Trading Works
Currencies are traded in pairs, such as:
- EUR/USD (Euro vs US Dollar)
- USD/JPY (US Dollar vs Japanese Yen)
- GBP/USD (British Pound vs US Dollar)
If you think the euro will rise against the dollar, you buy EUR/USD. If you’re right, you profit from the change.
📈 Why Is Forex Trading So Popular?
- ✅ Open 24 hours, 5 days a week
- ✅ High liquidity and fast execution
- ✅ Lower capital requirements (thanks to leverage)
- ✅ Can be traded anywhere with internet
Compared to the New York Stock Exchange’s $20 billion daily volume, forex looks massive. However, most of that volume comes from institutional players. Retail traders account for around $200–300 billion per day, a small but still significant piece of the pie.
What Influences Currency Prices?
- Central bank policies
- Economic indicators (inflation, interest rates, GDP)
- Geopolitical events
- Market sentiment
Advantages of Forex Trading
- Open 24 hours, 5 days a week
- High liquidity
- Low entry capital with leverage
- Trade from anywhere with internet
Risks of Forex Trading
- High leverage can lead to large losses
- Market volatility
- Requires education, discipline, and proper strategy
How to Start Forex Trading Successfully
- Practice with a demo account
- Learn both technical and fundamental analysis
- Apply strict risk management
- Set realistic expectations
- Stay updated with global financial news
🔗 Learn More
- How Does Leverage Work in Forex? (Outbound link)
- Join the Trader Forum community (Internal link)