Forex, also known as FX refers to currencies trading market. The word itself is the combination of two words: Foreign exchange.
Among all financial markets Forex is the most active one, with around 5 trillion dollars worth of currencies changing hands daily. This provides liquidity levels not seen in other markets.
FX markets are active 24 hours a day 5 days a week, since currencies are exchanged all over the world during the working days.
In forex market the currencies are traded in pairs. The first currency of the pair is called base currency, and the second one – quote currency.
Typical Forex quote looks like EUR/USD = X. What this means – is that you’re buying or selling 1 unit of base currency (EUR in this case) for X units of the quote currency (USD).
The exchange rates are usually quoted with 4 or 5 decimals, while a price move of 1 point in the last decimal is called a pip.
At exchanges FX rates are quoted with BID and ASK prices, while the difference between them is called spread. Spread usually depends on popularity of a certain pair that is reflected in its daily trading volume. Higher liquidity usually means lower spread.
The ever-changing exchange rates provide infinite opportunities for traders to speculate on. This is why forex trading is so popular among retail traders.
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