Foreign Exchange (Forex, FX)

The foreign exchange market, commonly known as Forex or FX, is the largest financial market globally, where currencies are bought and sold. Forex trading involves speculating on the price movements of currency pairs, such as the euro against the U.S. dollar (EUR/USD). It operates 24 hours a day and is decentralized, with transactions conducted over-the-counter through banks, brokers, and financial institutions. The market is driven by factors like interest rates, economic data, geopolitical events, and market sentiment.

Example

A trader buys EUR/USD, betting that the euro will strengthen against the U.S. dollar due to positive economic data from the Eurozone. If correct, the trader profits from the currency movement.