Trading on forex is a means to speculate on the relative values of currencies. Forex trading involves the simultaneous purchase of one currency and selling of another, with the aim of profiting from fluctuations in the exchange rate.
The market is enormous, with average daily turnover of $5.1 trillion, according to the latest assessment of the market.
Forex trading is described as being an over-the-counter (OTC) market, which means there are no central exchanges or clearing houses. Because of this forex trading is a truly 24/7 market, with prices moving constantly and gapping is less likely to occur.
The forex market is also said to be a principals-only market. To explain, when buying and selling stocks investors will use a broker. Forex trading firms are called dealers and assume risk to make the trade. Rather than charging commission, one of the primary ways brokers make money is on the bid-ask spread.
Forex trading always involves two currencies and is therefore sometimes called a zero sum game. When one currency rises in value by definition the currency on the other side of the cross necessarily loses value.