What is Forex Trading?

Forex is just a short way of saying ‘Foreign Exchange Market.’ This is the place where currencies are traded internationally, in a de-centralized, over-the-counter way. Trading takes place around the clock, with no breaks, with the exception of the weekends when the currency market is closed. With financial centers acting as anchors of trade throughout the world, beginning at 20:15 GMT on Sunday and stopping every 22:00 on Friday, currency trading is facilitated between a huge number and variety of buyers and sellers. The foreign exchange market itself determines the value of each different currency.

The chief reason for the foreign exchange market is to allow international trade and investment to proceed smoothly and with little restraint. The foreign exchange market allows businesses to convert one currency easily to another, as when a US businessman wants to import British manufactured goods and needs to pay Pounds Sterling, despite the fact that his business’s income is entirely in US dollars. Today’s foreign exchange market first started in the 1970s as countries around the world slowly changed to floating exchange rates. The previous exchange rates had been fixed, according the Breton Woods system which was deployed in the years immediately following World War II.