Forex is a word coined from combining the words “foreign” and “exchange”. It refers to the largest market in existence today. Just like goods, currencies can be bought and sold in the Forex or the currency exchange market, with the equivalent of more than a trillion US dollars being traded daily.

Forex – A Massive Global Market

The Forex market started peaking up in the 1990's and has since been a popular buzz word in the financial world. Yet, it is not merely a buzz word, but a giant industry where currencies of every kind are sold and bought like one buys or sells goods or equity. Its sheer size speaks of its importance in today's global economy.

What makes Forex so big a market and who are the major players? For one, whole governments are involved in Forex trading. They do so to stabilize their own currency in relation to another, which considerably affects trading of goods between these countries, among other things. For example, if the Treasury Office of a certain government purchases another currency, which effectively takes it off the Forex market, the value of the purchased currency will increase in relation to the purchaser's currency. This act can stimulate the demand for the purchasing country's export goods to the country whose currency was bought.

Multi-national corporations, those giant businesses operating in every major city around the globe, are also heavily involved in the Forex business, not primarily for profit purposes, but as a necessity to sustain their global operations. Purchasing products, raw materials or inputs from different countries to drive their businesses necessitates considerable reserves of foreign currencies. This comes in handy especially for those outsourcing their materials and even services from far-away countries.

The two afore-mentioned major players in the Forex market engage in it for other reasons than profit (though it can be a secondary motive). There are those, however, who get into it because foreign currency trading can be very lucrative. These businesses are attracted to Forex trading because it is the most liquid investment vehicle there is. Thus, profits can be immediately realized once a deal has been made.

In fact, online trading is such that once a trader clicks the “sell” button, he immediately lets go of that currency in real time. This means that he can immediately sell a losing currency (to cut on the losses) or acquire one that is on the upswing (to maximize profit potential).

Another major player in the Forex market with profit as its main motivation is the banking sector, particularly international banks. Banks usually trade currencies for their business account holders when they make Forex transactions. Moreover, they also offer services to hold deposits in banks abroad or in different currencies, which is advantageous for their depositors because the latter can exchange their local currency for a relatively strong currency in the Forex market through the banks, and realize profit in the process.