The foreign exchange market (forex, FX, or currency market) is a worldwide, decentralised, over-the-counter financial market for trading currencies. Compared to the measly $22.4 BILLION per day volume of the New York Stock Exchange (NYSE), the foreign exchange market looks absolutely ginormous with its $5.3 TRILLION a day trade volume. Forex is well over three times the total of the stocks and futures markets combined. The forex market is open 24 hours a day, five days a week and currencies are traded worldwide among the major financial centers of London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.
If you’ve ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange the money you have in your wallet (if you’re a dude) or purse (if you’re a lady) into the currency of the country you are visiting. You go up to the counter and notice a screen displaying different exchange rates for different currencies. You find “Japanese yen” and think to yourself, “WOW! My one dollar is worth 100 yen?! And I have ten dollars! I’m going to be rich!!!” (This excitement is quickly killed when you stop by a shop in the airport afterwards to buy a can of soda and, all of a sudden, half your money is gone.) When you do this, you’ve essentially participated in the forex market! You’ve exchanged one currency for another. Or in forex trading terms, assuming you’re an American visiting Japan, you’ve sold dollars and bought yen. Before you fly back home, you stop by the currency exchange booth to exchange the yen that you miraculously have left over (Tokyo is expensive!) and notice the exchange rates have changed. It’s these changes in the exchanges rates that allow you to make money in the foreign exchange market.