Forex (FX) refers to the global electronic marketplace for trading international currencies and currency derivatives. It has no central physical location, yet the forex market is the largest, most liquid market in the world by trading volume, with trillions of dollars changing hands every day. Most of the trading is done through banks, brokers, and financial institutions.

The forex market is open 24 hours a day, five days a week, except for holidays. The forex market is open on many holidays on which stock markets are closed, though the trading volume may be lower.

Its name, forex, is a portmanteau of foreign and exchange. It's often abbreviated as fx.

Understanding Forex

Forex exists so that large amounts of one currency can be exchanged for the equivalent value in another currency at the current market rate.

Some of these trades occur because financial institutions, companies, or individuals have a business need to exchange one currency for another. For example, an American company may trade U.S. dollars for Japanese yen in order to pay for merchandise that has been ordered from Japan and is payable in yen.

A great deal of forex trade exists to accommodate speculation on the direction of currency values. Traders profit from the price movement of a particular pair of currencies.