The foreign exchange market was created when floating exchange rates started to materialize. The market, commonly referred as forex, is not centralized and trading happens over telephones and computers at thousands of locations worldwide. This market is considered as an over-the-counter (OTC) or interbank market because of the fact that all forex transactions are conducted between two counterparts via telephone or an electronic network.

In the past, foreign exchange trading was dominated by major international commercial and investment banks but large multinational corporations, global money managers, international money brokers, registered dealers, private speculators, and futures & options traders now constitute the forex market.

It is worth noting here that participants of the forex market are interested in trading for three main reasons. The first one is for facilitating an actual transaction, whereby major international corporations covert profits made in foreign currencies into the domestic currency. Corporate treasures and money managers, on the other hand, enter the forex market for hedging against unwanted exposure to price movements at a future date in this market. Private speculators and others trade forex for making profits arising from speculation.

Banks, investors, and speculators exchange one currency to another in the foreign exchange market that is the largest financial market in the world. It is worthwhile to note that a big proportion of forex trading involves five major currencies: the United States dollar (USD), British Pound (GBP), Euro (EUR), Swiss Franc (CHF), and Japanese Yen (JPY). The foreign exchange market involves a daily trading volume of approximately US$4 trillion and is open 24 hours a day, 5 days a week. Trading begins each day in Sydney and move around the globe, first to Tokyo, London, and New York.

We hope that this information on foreign exchange education would prove to be a useful guide for you in the short and the long run.