There are a few words used to describe the trading of our world’s currencies: Forex, Foreign exchange or FX. Forex trading amounts to over three trillion US dollars everyday which makes it the largest market in the world. But almost all of that amount is speculative with just a small portion being activity that represents companies or governments fundamental currency conversion.
Forex is not conducted on a central exchange like the stock market. It takes place on the interbank market which is also called the over the counter market. When a trade takes place, it is done directly between the two who are making the trade. This can be done by phone or on an electronic network and happens all over the world.
New York, Sydney, London, Frankfurt and Tokyo are the main centers for trading and with this world wide distribution, forex trading is an open market that does business twenty-four hours a day. When a forex trade happens, it is actually the buying of one currency and the selling of another that takes place at the same time. The most commonly traded currencies are EURUSD, USDJPY, USDCHF and GBPUSD. These are what is referred to as the majors.
