What is the FX Market

The Foreign Exchange Market (Forex, FX, or Currency Market) is a global, decentralized market place for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or pre-determined prices. In terms of volume of trading, the FX Market is the largest market in the world, with main participants in this market being the larger international banks.
Financial centres around the world function as anchors of trading between multiple types of buyers and sellers. The foreign exchange market determines the relative values of different currencies against one another. The foreign exchange market is unique due to the following characteristics:
  • Sizeable trading volume representing the largest asset class in the world leading to high liquidity;
  • Geographical dispersion;
  • Continuous operation: 24 hours a day 5 days per week, i.e., trading from 22:00 GMT on Sunday (Sydney) until 22:00 GM Friday (New York);
  • The variety of factors that affect exchange rates;
  • Low margins of relative profit compared with other markets of fixed income;
  • Easily accessible leverage to enhance profit and loss margins and with respect to account size;

Taking into consideration all the above mentioned characteristic of the FX Market, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. According to the Bank for International Settlements, the preliminary global results from the 2013 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity show that trading in foreign exchange markets averaged $5.3 trillion per day in April 2013. This is up from $4.0 trillion in April 2010 and $3.3 trillion in April 2007.