About Forex

The Forex market is a cash inter-bank or inter-dealer market established in 1971 when floating exchange rates began to materialize. Today, the exchange of currency has expanded from trading floors to home computers. The simplest definition of foreign exchange is the changing of one currency to another, and, unlike the stock market, one may earn profits whether buying or selling within the currency exchange. In comparison to the daily trading volume averages of $300 billion in the U.S. Treasury Bond market and the less than $10 billion exchanged in the U.S. stock markets, the Forex market is huge. Currently there is often an average of 3.5 trillion levels exchanged daily.

The most important foreign exchange activity is the spot business between the dollar and the four major currencies (Euro, British Pound, Swiss Franc and Japanese Yen). Activity within the market is created by six main groups: central banks, commercial banks, other financial institutions, corporate customers, brokers and independent currency traders who have established home-based businesses.

Forex is not a "market" in the traditional sense. There is no centralized location for trading activity as there is in currency futures. Trading occurs over the telephone and through computer terminals at thousands of established locations, as well as within home-based trading businesses worldwide.