Foreign Exchange Market (Forex Market)

Definition - What does Foreign Exchange Market (Forex Market) mean?

The foreign exchange market is a decentralized market where national currencies are traded for one another. The buying and selling of currencies on the forex market establishes the values of those currencies, which impacts the exchange rate offered for those currencies by traditional retail outlets like banks and moneychangers. The forex market is one of the world’s largest and most liquid markets, boasting a daily trading volume of over $3 trillion dollars.

The forex market is active 24 hours a day over the trading week, with markets spread over the world’s time zones. Some of the major markets are:

  • New York
  • Frankfurt
  • Tokyo
  • London
  • Australia
  • New Zealand
  • Hong Kong

The forex market is also referred to as the currency market and the FX market.

ForexDictionary explains Foreign Exchange Market (Forex Market)

The forex market is best thought of as an international market where the national currencies of every country can be bought and sold. The prices at which the currencies trade at are determined by how much of a specific currency people are trying to sell (supply) and how much of a specific currency people are trying to buy (demand).

The exact volume of money flowing through the forex market on a daily basis can’t be accurately measured because there is no single exchange. The value of transactions across the world is consistently above $3 trillion, but has spiked higher than $6 trillion on certain days. The forex market is unique in that it allows more leverage than any other market, meaning that an investor with limited capital can still control a large trading position.

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