In simple terms, Forex, or FX for short is the global market that allows for the exchange of one currency for another.
We are often involved in the forex market except that a lot of times we don’t know, or we don’t do it for profit. For instance, when you traveled to another country, you usually had to find a bureau de change and then exchange the money you have in your wallet into the currency of the country you are visiting.
For instance, you could be visiting neighboring Togo and realize that your ₦1 is worth 3 Cfa.
You’ve exchanged one currency for another! When you do this, you have simply participated in the forex market, there’s no better way to put this—this is simply forex.
Do you realize that the exchange rates sometimes don’t remain the same by the time you are ready to go back home, and you stop by the currency exchange booth to exchange your leftover Cfa to Naira?
When you decide to make forex a profit-making venture, it is these changes in the exchanges rates that allow for profit in the Foreign exchange market.
The foreign exchange market is unarguably the largest financial market in the world. The Nigerian stock exchange market could be termed “meager” at a daily volume of ₦ 248,364,916.00 when compared to the foreign exchange market with a whopping $5 TRILLION a day trade volume.
Even the largest stock market in the world, the loudly celebrated New York Stock Exchange (NYSE), trades a volume of about $22.4 billion each day which is nowhere around $5 Trillion.
If you review the largest Stock exchange markets; New York Stock Exchange, Tokyo Stock Exchange, and London Stock Exchange, and the forex market, you’ll find that the currency market is over 200 times bigger. Now here’s the catch;
Of the gigantic $5 trillion which covers the entire global foreign exchange market, 5-6% of the overall volume, or between $300-400 billion is the daily trading volume from retail traders (that’s us).
In addition to the size, the forex market is open 24 hours a day and 5 days a week, only closing down on the weekend. So, unlike the stock or bond markets, the forex market does not close at the end of each business day. Trading rather shifts to different financial centers around the world.