The foreign exchange market, also known as the currency market and commonly abbreviated as forex or simply ‘FX’, is the largest, most liquid, most actively traded financial market in the world. With an estimated four and half trillion dollars of value being traded everyday, the foreign exchange market is a decentralized network of financial institutions where all the world’s currencies are traded.
Participants who partake in currency trading in the foreign exchange market, commonly known as currency traders, can be central banking and commercial banking institutions, investment firms, various companies and even small time individuals, all who can be located anywhere in the world.
When I say that the foreign exchange market is a decentralized financial market, I mean there is no singular location where all currencies are traded. Currency transactions can take place from various locations around the world. One location doesn’t have authority over another.
The United States Stock Market is an example of a centralized financial market. All transactions are conducted in a single location. One example of a centralized location where stocks are traded is the New York Stock Exchange. Unlike the stock market, which is open for six to seven hours per day five days a week, the foreign exchange market is open twenty-four hours per day, five days a week.