Foreign Exchange Market (FOREX)

The Foreign Exchange market (FOREX or FX, for short) is the international currency exchange market. On the FOREX, currencies with a flexible rate are traded; the trading takes place practically 24 hours a day, 5 days a week, i.e. continuously on a world-wide level. This is possible because in contrast to the stock markets, FOREX does not have a central physical presence and the trading occurs solely with the help of information technology and interconnected network systems.

FOREX in practice: At the foreign exchange market, trade in currencies with a flexible currency rate occurs in so-called currency pairs (e.g. the US dollar and the Euro form the currency pair USD / EUR) – this is where the rates of the currencies in relation to each other get set. The FOREX market is the biggest and the most liquid of all financial markets world-wide. The trading on the FOREX is free of charge, it doesn´t require any special permits or licences; all that it takes is an internet connection and software which enables its user to trade over the internet. Trading on the FOREX is open to practically all financial subjects – individual investors as well as institutions (banks, investment funds, brokers). FOREX traders aim to profit from the movement of currencies – they buy one currency and sell another one. Similarity to the stock market, no physical consummation of the trade takes place; the sold or bought currency does not physically change owners, but the trader only uses the movement of the rates for the realization of profits.