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What is Forex?

Forex, short for foreign exchange, is the global financial market that allows the trading of currencies. It is the largest and most liquid financial market in the world, with a daily trading volume of over $7.5 trillion.

Currency Exchange

The forex market facilitates the exchange of one currency for another. This is something most people have experienced when traveling to another country. For example, if you are an American visiting Japan, you would need to exchange your U.S. dollars for Japanese yen in order to make purchases in Japan.

The exchange rate, which is the relative price of two currencies, determines how much of one currency you can get for another. These exchange rates are constantly fluctuating, and it is these fluctuations that allow forex traders to potentially make a profit.

Forex Trading

In the forex market, traders buy and sell currencies with the goal of profiting from changes in the exchange rates. They speculate on which currency will increase in value relative to another. If their prediction is correct, they can sell the currency at a higher price and make a profit.

Market Size and Liquidity

The forex market is much larger than other financial markets, such as the stock market. The daily trading volume of the forex market is estimated to be around $7.5 trillion, compared to only around $200 billion for the New York Stock Exchange (NYSE).

This large size and high liquidity (ease of buying and selling) are two of the key features that make the forex market attractive to traders.

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24-Hour Trading

Unlike the stock market, which has set trading hours, the forex market is open 24 hours a day, 5 days a week. This is because trading shifts between different financial centers around the world as the day progresses, from New Zealand to the United States and back again.

In summary, the forex market is the global marketplace for the exchange of currencies, where traders speculate on the relative values of different currencies in order to make a profit. Its massive size, high liquidity, and 24-hour trading make it a unique and dynamic financial market.

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