Trading by Governments, businesses , banks, institutions, investors and speculators in the foreign exchange market is known as FOREX or Foreign Exchange. The Foreign Exchange market is a global decentralised market that determines the value of currencies.
In the FOREX market the exchange rate between two currencies constantly changes Currencies trade on the open market, just like stocks, cars, food and other goods and services.
The value of a currency will fluctuate as its supply and demand fluctuate. An example of this is that when iron ore is in high demand by China who are buying it from Australia and the price of iron ore is high, then the Australian dollar will also be in high demand resulting in it's value rising in price against other countries.
The FOREX market is the largest trading market in the world and is estimated to exceed a turnover over 3.5 trillion US dollars every day and has increased in volume every year by over 20% since 2008.
The market trades twenty four hours every day and five days each week. The high volume turnover makes it a very liquid and ideal market for trading.
In previous trading this market was only available to countries, Governments, banks, large institutions and wealthy investors.
