The largest traded “market” in the world is not the U.S., Japanese or European stock markets. It’s the foreign exchange market. It’s called Forex for short, or also called the cash currency market. Speculators can and do trade this huge market, in which nearly 2 trillion dollars (and other currencies) can change hands every day.

The main function of the foreign exchange market is to provide the mechanism for making cross-border payments and determining exchange rates between currencies. Major components that make up the Forex market are the spot market (37%) used by traders and speculators, swaps (43%), and options and forwards (20%).

A Forex trade is executed through the simultaneous buying of one currency and selling another (currency pair). While most currencies are tradable, five currencies (four currency pairs) represent the majority of foreign exchange trading volume. They are the Euro ( EUR/USD), Yen (USD/JPY), British pound or cable (GBP/USD), and Swiss franc (USD/CHF)

In the modern age of computers and digital trading, forex trading has become less dependent on a physical exchange of currencies. These days a trader can make a foreign exchange trade simply by placing an order using a computer. The trade can be held anywhere from minutes to years depending on the intention of the trader.

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