The foreign exchange (forex, or fx) is the international marketplace for currency exchange. It is the largest financial market in the world, with over $3.9 trillion dollars traded daily. Unlike the stock exchange, there is no centralized market. Instead, currencies are exchanged 24 hours a day, except from 4PM EST Friday until 3PM EST Sunday. Forex is considered an over-the-counter (OTC) market, with most business being conducted electronically (over the internet) or by phone.
The simple answer: Money! Forex differs from other markets in that instead of buying (or selling) a stock or commodity, a currency exchange involves both buying and selling, simultaneously. You sell one currency in exchange for another. All currencies are listed in pairs, with the first currency being the base currency and the second currency being the counter currency. The base currency is the currency being bought (or sold) and the counter currency determines the profit (or loss). The 7 major currency pairs exchanged on the forex market are: Euro vs. US Dollar (Eur/USD), British Pound vs. US Dollar (GBP/USD), US Dollar vs. Japanese Yen (USD/JPY), US Dollar vs. Swiss Franc (USD/CHF), US Dollar vs. Canadian Dollar (USD/CAD), Australian Dollar vs. US Dollar (AUD/USD), and New Zealand Dollar vs. US Dollar (NZD/USD). All of the major currency pairs involve the US dollar, although there are several currency pairs (called cross-currency pairs, or crosses) which don't. The most actively traded crosses are: Euro vs. Swiss Franc (EUR/CHF), Euro vs. British Pound (EUR/GBP), Euro vs. Japanese Yen (EUR/JPY), British Pound vs. Japanese Yen (GBP/JPY), Australian Dollar vs. Japanese Yen (AUD/JPY), and New Zealand Dollar vs. Japanese Yen (NZD/JPY).
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