Module 1: What forex is · Lesson 1 of 13

What is the forex market?

3 min read

The forex market (short for "foreign exchange") is the global network where one currency is swapped for another. Whenever someone changes pounds into euros, or a company pays a supplier abroad, they are taking part in it.

A market without a single building

Unlike a stock exchange, forex has no central trading floor. It is an over-the-counter (OTC) market, meaning trades happen directly between participants over electronic networks. Large banks quote prices to each other, and brokers pass those prices on to their clients. Because there is no single venue, prices can differ very slightly from one provider to the next.

Why it is so large

Every country with its own currency needs a way to trade it. Importers, exporters, tourists, investors and governments all create demand for foreign currency, so forex is by far the biggest financial market in the world by daily turnover. That size usually means high liquidity - the ability to buy or sell quickly without moving the price much - especially in the most popular currencies.

Open around the clock on weekdays

Because financial centres in Asia, Europe and North America open one after another, the market trades 24 hours a day from Sunday evening to Friday evening (UK time). You will learn more about these trading sessions in a later module.

Trading versus exchanging

When you swap cash at an airport you physically receive the other currency. Most retail forex traders never take delivery of anything. Instead, they speculate on whether one currency will rise or fall against another and settle the profit or loss in their account currency.

Example: Suppose you believe the euro will strengthen against the US dollar. You could buy euros with dollars through a broker. If the euro rises, you can sell it back for more dollars than you paid, keeping the difference as profit. If it falls, you make a loss.

Risk: Forex is usually traded with leverage, which magnifies both gains and losses. Beginners can lose money quickly, so always learn the basics and practise first.

Key takeaways

Forex is the global market for exchanging one currency for another.
It is decentralised (over-the-counter), with no single exchange.
It trades 24 hours a day, five days a week.
Most retail traders speculate on price moves rather than taking delivery of currency.

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Educational content only — not investment advice. Leveraged trading carries a high risk of loss.