As its name indicates, the Forex market (or FX, from ‘foreign exchange’) is a market where currency is exchanged between investors and banks and brokers. Forex market prices are transparent and incur very small spreads (transaction fees). Transactions on the Forex market are carried out on a 24/7 basis all around the world.
Transactions are performed on pre-defined currency pairs (e.g. GBP/USD), where the first currency is the base currency, against which the other currency is quoted. Most transactions (approx. 80%) are based on the major world currencies, i.e. USD, JPY, EUR, GBP, CHF, CAD and AUD, while other currencies account for the remaining 20% of Forex transactions.
The Forex market is characterized by high liquidity and volatility (up to 120 pips per day), which offers investors many opportunities for currency transactions. The daily turnover generated by the global currency market exceeds $ 2.5 trillion, which is 750 times more than the corresponding NASDAQ figure.