Forex, which stands for foreign exchange, is the exchange of one currency for another or the conversion of one currency into another currency. It’s sometimes abbreviated as FX.
So simply put, foreign exchange is exchange of currencies.
Foreign exchange also refers to the global market where currencies are traded virtually 24 hours a day, 5 days a week opening at 4pm CST on Sundays and closing at 4pm CST on Fridays.
Let’s look at an example.
Let’s imagine that you’re going for a vacation to Europe. In that case, you will have to change your US Dollars into Euros by going to the exchange shop.
By doing this act, you’ve basically conducted a currency exchange and therefore you have become a participant of the Forex market.
Let’s say you trade in your 2 US Dollars for 1 Euro on the way to your vacation to Europe.
After staying there for several months, you’ve decided to come back to the States and change back your money.
However this time, after trading in your 1 Euro, you got 2.50 US Dollars. The amount of money you got was higher than before. You just made an extra 50 cents!
These fluctuations in currency prices are what’s going to allow you to make money in the foreign exchange market. The larger volume you trade, the more money you can make from these fluctuations.