Demystify foreign exchange markets, liquidity tiers, trading sessions, and key terminology for anyone looking to understand international currency trading.
Introduction to the Global Forex Market
The Foreign Exchange market, universally known as Forex or FX, is the largest and most liquid financial market in the world, with daily trading volumes exceeding $7.5 trillion. Unlike centralized stock exchanges such as the New York Stock Exchange, Forex operates as a decentralized, over-the-counter (OTC) market spread across major financial capitals.
Participants range from central banks and global financial conglomerates to commercial corporations, international tourists, and individual retail traders.
Understanding Base and Quote Currencies
In foreign exchange trading, currencies are always quoted in pairs, such as EUR/USD or USD/JPY. The first currency listed is the Base Currency, while the second is the Quote Currency.
When you see a rate of 1.0900 for EUR/USD, it signifies that 1 Euro can be exchanged for 1.0900 US Dollars. Buying the pair means purchasing the Base currency while selling the Quote currency.
Frequently Asked Questions
When are Forex markets open?
Forex markets operate 24 hours a day, 5 days a week, starting Sunday evening EST (Sydney session) through Friday afternoon EST (New York session).