The foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business.. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.
The need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world. It dwarfs other markets in size, even the stock market,
with an average traded value of around U.S. $2,000 billion per day. (The
total volume changes all the time, but as of August 2012, the Bank for International Settlements (BIS) reported that the forex market traded in excess of U.S. $4.9 trillion per day.)
One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter
(OTC), which means that all transactions occur via computer networks
between traders around the world, rather than on one centralized
exchange. The market is open 24 hours a day, five and a half days a
week, and currencies are traded worldwide in the major financial
centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong,
Singapore, Paris and Sydney - across almost every time zone. This means
that when the trading day in the U.S. ends, the forex market begins anew
in Tokyo and Hong Kong. As such, the forex market can be extremely
active any time of the day, with price quotes changing constantly. So trading forex can be extremely lucrative but very risky for someone who does not understand it or know the technical aspects of how to do it. I have spent a lot of money and time trying to learn it but now have decided to let the professionals do it for me. I will share how I came upon this in my next post.