The largest financial market for trading worldwide, the Foreign Exchange Market is more commonly known as Forex. Due to its ease of access the Forex market is increasingly favoured over the equity market. Thanks to the growth of the internet, in recent years, it has become increasingly easy for individuals to start trading without having to make significant financial investment, as trading can be carried on with relatively small amounts of money. The Forex market is open, with the exception of weekends, 24 hours a day, so access to trade is high. As a result, Forex has become a popular choice with sophisticated investors.
Currency is always quoted in pairs on the Forex trading system, with acronyms being used to represent each currency; for example, a Euro/Pound currency pair would be represented EUR/GBP. A typical trade might involve purchasing a quantity of the counter currency; shown second, with the base currency; shown first. This would be considered to be a spot trade.
Trading is based on the value of the currency and the exchange rate is based on the fluctuations in the market. Factors that can influence these fluctuations might include industrial production, inflation and world events. Exchange rates indicate the value of one currency in relation to another, which form the currency pair; these two currencies also indicate the exchange rate. Profit is made by correctly predicting an increase in currency value and exchange rate.