What is Forex?

Forex (FX) is an interbank currency exchange market. It is the marketplace for exchanging currencies of various countries. At the same time, derivatives such as forwards, futures, options, and currency swaps can be traded on Forex. 

A specific feature of the Forex market is the fact that there is no central marketplace. Trading is carried out over-the-counter (OTC), i.e. all transactions are conducted on the Internet between traders around the world. Thus, there is no centralized exchange. Besides, the Forex market operates round the clock five days a week except Saturday, Sunday, and international holidays such as the New Year’s Eve and Christmas. 

Compared to stock markets that have multi-century backgrounds, the Forex market is a relatively young one. Of course, people started exchanging currencies ages ago, but in the modern sense the foreign exchange market has appeared quite recently. In particular, at the Bretton Woods conference of 1971, the gold standard was abolished and most major currencies were set to float freely against each other. The rates started to vary, so a need for currency exchange and trading has arisen. 

The currency market operations can be trading, speculative, hedging or regulatory. Thanks to the fast development of a global network, Forex offers real opportunities for every person regardless of their skills and experience. Only Internet access and a trading platform are required to start trading on the foreign exchange market. 

The daily FX trading turnover is over $6 trillion which is much more than the trading volume of the global stock markets^[1].  

Almost 90% of all foreign-exchange transactions involve the US dollar. At the same time, transactions with the major currencies pairs such as EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, USD/CAD, USD/CHF account for more than 85% of the total number of deals^[2]. 

Though New York is thought to be the centre of forex trading, the actual hub is London. More than 40% of all transactions take place in the UK, while only 19% are carried out in the US^[3].

Some time ago, only large banks and financial institutions could access the Forex market as the entry threshold was at least $40 million to $60 million in liquid funds. Nowadays, people with a much smaller initial capital can become market participants as the dealing centers play a role of intermediaries and make it possible to start forex trading with just $100. 

The US dollar has several nicknames. One of them is the greenback, as the paper notes issued during the American civil war were of green color. The Buck is another slang for the US dollar. It originates from the times when the American Indians used to trade bucks, i.e. male deer, for the US dollars.