What is Forex

Have you ever been to another country?

If you, As soon as you get down on to the air port of that country you should have to exchange your money in to the currency of that country
For an example you are from Japan and travel to Sri Lanka here you have to exchange your Japanese Yen into Sri Lankan Ruppies... If not you'll not able to buy any thing from Sri Lanka because Sri lankan shops not accept Japanese Yen . In this case you've involved in Forex Trading.FX or Forex means Foreign exchange market.
In above example you've sell Japaniese Yen and Buy Sri Lankan Ruppies
You've exchange one currency to another.
And also after comming back to Japan you should exchange Sri Lankan Ruppies into Japanese Yen

Any way Foreign Exchange Market is the Largest Finansial exchange market of the world

What is trade in forex

- answer for this question is MONEY

But the problem is we don't feel that we are buying something .. Because we are not going to buy anything physically.
Image that you are trading money in share market this is something similar to that.You buy currency from one country is same to a buying share from a company. Usually it ends up with profit if you trade properly.But there is also a risk

Spot Market and Forwards and Future markets

There are three ways of trading forex by individuals, corporation and institution those are

Spot Market

Forward and Future market

The spot market is the largest one because it is the underlying real asset that forward and future markets are based on. In past futures market is more popular because it is available for individual investors for a long period of time.

But after the electronic trading was invented spot market became more popular among individual traders. Forward and future markets became more popular among companies which want to reduce their foreign exchange risk.

Spot market

In spot market currencies are buying and sell by traders according to the current price. The price can determine by supply and demand. When deal is finalized then it is known as “spot deal”. After a position closed settlement is in cash. Spot market deals with the percent transaction rather than future. Usually traders take two days per settlement

Forwards and Future markets

Forward and future markets do not trade actual currencies they deal in contracts and represent claims to a currency type, specific price per unit and future date for settlement.

Market Size and Liquidity

There is no physical center for forex market.

FX market is consider as an OTC (Over The Count) or "inter bank" market because it runs 24 hours electronically without stopping

this runs over networks of banks all over the world. This means there is no need of physical location for fx market.It can be anywhere.

This is the most popular and biggest exchange market of the world

Participants of fx market decides what are the currencies they should trade..

depending on

- Trading conditions

- Attractiveness of price

- Reputation of the trading counterpart