What Does Forex Trade Mean?

Forex stands for "foreign exchange market." It is the largest financial market in the world, with about $4 trillion (U.S.) in currency changing hands each day.

How is the Forex Structured?

Also sometimes called the FX, the forex market is decentralized. This means that no single government, company or financial institution actually controls the forex or the trades that go on within it. While anchored in large financial centers like London, New York and Tokyo, trades can take place anywhere in the world at almost any time (the exchange operates 24 hours per day, 5 days per week). Anything from large financial trading houses to central banks to individual brokers can make a forex trade anytime the market is open.

What is the History of the Forex?

The foreign exchange market as we know it today began forming in the 1970s. Up until that time, most countries were pegging their currency rates to that of other major currencies, such as the British pound or the U.S. dollar. However, as countries started switching to floating exchange rates, there was no universal way to compute the value of a country's currency. Rather, the value was being determined at all times by market forces. The value was fluid and always changing.

What Does Forex Trade Mean?

A Forex trade is simply the act of exchanging one type of legal tender currency for another type. Some companies make a forex trade when they make a purchase of goods using a foreign currency rather than in the currency of their global headquarters. Central banks may try to stabilize world markets by buying up billions or trillions of dollars of another country's currency.

Among the most interesting types of trades are those made by individual speculators and investors who are interested in making money from their currency trades. For example, if you are holding British pounds but believe that they will become less valuable in the near future than they are today relative to the Japanese yen, you may choose to sell your pounds and buy more yen.

Many foreign exchange currency traders use sophisticated software programs to help them track exchange rate trends and predict opportunities for making a successful trade. This is an intelligent way to manage the complexities of a trade.