In a simple words foreign exchange means buying of one currency and selling of another currency.

Foreign exchange trading increased by 20% between April 2007 and April 2010 and has more than doubled since 2004. The increase in turnover is due to a number of factors: the growing importance of foreign exchange as an asset class, the increased trading activity of high-frequency traders, and the emergence of retail investors as an important market segment. The foreign exchange market (FOREX) is the largest financial market in the world with 4 trillion USD daily. This is three times more than the total amount of stock and future markets combined. 24 hr market from Monday to Friday. The foreign exchange market is largely a over the counter (OTC). Here the traders sits in a office and do transactions over a telephones, telexes and other electric mean of communication. In currency market, Currencies are traded through broker and dealer & executed through currency pairs. London, New York, Tokyo are the major market centers. Others are Zurich, Frankfurt, Hong Kong & Singapore Structure of foreign Exchange market This market is exists in retail as well as wholesale level. In the retail market for foreign exchange, travelers and tourists exchange one currency in the form of exchange notes. The total turnover of this kind of market is very small. The wholesale market is often called interbank market. The participants in these markets are commercial banks, investment banks, corporations and central banks. The total turnover in this market is very large. Getting Started Why to trade foreign currencies?

In todays market place, the dollar constantly fluctuate against other currencies of the world. Several factors such as, the decline of global equity markets and declining the world interest rates, have forced investors to pursue new opportunities. Which currencies are traded? Any currency backed by an existing nation can be traded at the larger brokers. In currency market, major currencies are traded is US dollar(USD), EURO dollar(EUR), Japanese YEN (JPY), the British Pound sterling(GBP), the SWISS FRANC (CHF), The Canadian Dollar (CAD), and the Australian Dollar (AUD). And all other currencies are treated as a minor. Who trades on foreign exchange? There are two main group that trade currencies. About 5% of daily volume is from companies and governments that buy or sell products or services in a foreign country. Another 95% consists of investors trading for profit or speculations. How currency prices are determined?

Currency prices are affected by variety of economical and political conditions, but probably the most important are interest rates, international trade, inflation and politically stability. Sometimes government actually participates in the FOREX market to influence the value of their currencies. Advantages of currency market 1. No commission: No exchange fees, no clearing fees, no government fees, no brokerage fees. 2. No middlemen: here client is directly access the market and sole responsible for the same. 3. low transaction cost: less than 0.1% 4. high liquidity: Forex is most liquid market in the world means trader can enter or exit in any condition of the market. 5. A 24-hr market Global FOREX market turnover Spot transactions: A spot transaction is a two-day delivery transaction. Outright Forwards: An outright forward contract allows an investor to buy or sell a currency on a specific date or within a range of dates forex swaps: FX agreement between 2 parties to exchange a set amount of 1 currency for another and, after a certain specified period of time, to give back the original amounts that swapped. Currency swaps: Agreement to exchange one currency with another, at a specific rate of exchange. Source: BIS- Triennial central bank survey 6. online access