The foreign exchange market (Forex)
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 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.)
Forex trading has evolved in recent years. With the Meta Trader 4 & Meta Trader 5 software,
forex trading has taken a new shape as currencies are now traded with ease and professional
traders can count on their skills for assured results.
The forwards and futures markets do not trade actual currencies. Instead they deal in contracts
that represent claims to a certain currency type, a specific price per unit and a future date for settlement.