The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world with a daily average turnover of US$1.9 trillion -- 30 times larger than the combined volume of all U.S. equity markets.

Foreign Exchange is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).

There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit or speculation.

For speculators, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which consists of the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.

A true 24-hour market, Forex trading begins each day in Sydney, and advances around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike other financial markets, Forex allows investors to respond to currency fluctuations caused by economic, social and political events instantaneously at the time they occur - day or night.

The FX market is considered an Over The Counter (OTC) or 'interbank' market due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Forex is not centralised on an exchange, as are the stock and futures markets.

Why Trade Forex?

Currency Market is very similar to other financial markets. For example, Forex is traded with recognisable patterns and clearly-defined technical applications, comparable to those found in stock trading.

But the real advantages of Forex trading are obvious in the market's unique features. Forex attracts so much investor interest due to the many advantages not found in other financial markets, such as:

• Greater Buying Power: Many forex brokers offer up to 200:1 leverage, much higher than the standard 2:1 leverage granted by equity brokers.
• 24-hour Trading Activity: In the forex market, traders can respond to breaking news immediately, day and night. Since currencies are traded worldwide, 24 hours a day, they are not vulnerable to "after hours" reports and value loss.
• Superior Liquidity: With almost $2 trillion in daily transactions, Forex is the largest and most liquid market in the world. The sheer volume of this market helps ensure price stability and the execution of orders are fair market prices.