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The Foreign Exchange Market , or forex market (also known as the currency market or FX market), is the largest center of trading between countries in terms of certain currencies in which investments are made, usually through a broker or a financial company. In broad terms, forex trading is not very different from stock market trading except that the FX trading operates on a significantly larger level/scale. The parties involved in FX trading range from governments and banks to brokers and (in a smaller number of cases) retailers. In the latter case, the term spectator has been coined for the average person who takes part in trading. Owing to the dynamics of financial market and the flux in financial conditions, trading in forex market witnesses several ups and downs on a daily basis.


Long-term studies reveal that interbank trades, i.e. those made between banks, are the most frequent kinds of FX trading. Such transactions make up nearly 50% of FX trading and they serve the purpose of earning profits for stockholders as well as for boosting the business of the concerned banks. By providing money to small investors, investment advisors (i.e. ‘fund managers’) raise the interest that is paid to a bank account. To hold more money in the accounts, banks use daily FX trading, sometimes investing millions at once in the currency market, and getting the money to people the next day in the form of checking accounts and savings etc.

In addition to banks, the forex market is a popular trading venue for commercial companies, usually the big ones, which actively use FX trading for increasing the profits of their stockholders. While smaller companies are also involved in the FX market, their involvement is not as frequent and prominent as that of the larger commercial companies like UBS, Citigroup, Deutsche Bank, HSBC, Merrill Lynch, and Morgan Stanley etc. Still, the forex market does witness participation from smaller commercial groups.

The forex market is also a point of huge commercial interest for central banks, i.e. those having an international role in foreign markets. Central banks control a number of financial elements like supplying money and ensuring its availability, and determining the interest rates on investments or accounts etc. Located mostly in the world’s capital cities, central banks have an important role to play in FX trading. Those operating in New York, London, and Tokyo are considered as the most important central banks in connection with the forex market. The profit and loss scenario is quite dynamic in the forex trading; sometimes banks and investors make dazzling profits; and sometimes, they share the shock of a big loss.