## What is Forex? The Must-Know Guide to the World's Largest Financial Market for Beginners

**Forex** (Foreign Exchange, abbreviated as Forex or FX) is an investment method involving exchanging one currency for another. Simply put, when you believe a currency will appreciate and your prediction is correct, you can profit.

Let's understand this with a real-life scenario: Xiao Wang is going on a business trip to the US and finds a currency exchange window at the airport. He sees various exchange rates displayed on the screen—that's the relative price of two different currencies. Suppose the New Taiwan Dollar (NTD) to US Dollar (USD) exchange rate is 0.034; he exchanges 10,000 NTD for 3,400 USD. At this moment, Xiao Wang has participated in the forex market transaction.

## How Big Is the Forex Market? The Data Speaks

The forex market is the largest financial market in the world and is a decentralized global marketplace, with exchange rates fluctuating every second.

How big is it? **Daily trading volume reaches $6.6 trillion**. In comparison, the New York Stock Exchange (NYSE) trades only about $22.4 billion daily. This means the daily trading volume of the forex market is roughly 300 times that of the NYSE.

But don’t be intimidated by this number. The actual spot forex market’s daily trading volume is about $2 trillion, with retail traders accounting for roughly 3-5%, or about $20-30 billion.

## When Does the Forex Market Open? Operates 24/7

**Its biggest feature is that it’s almost open around the clock**. The forex market operates 24 hours a day, five days a week, only closing on weekends.

The trading process starts in Auckland/Wellington, New Zealand → Sydney → Singapore → Hong Kong → Tokyo → Frankfurt → London → New York, then cycles back to New Zealand. Traders in any time zone can find suitable trading windows.

This is completely different from stock and bond markets, which have fixed opening and closing times. The forex market is a global financial hub that takes turns "on duty."

## What Is Traded in the Forex Market? Just Money

The answer is straightforward—**currencies**. Since there’s no physical delivery involved, many find it abstract. Think of it this way: buying a currency is like buying a country's economic outlook.

Suppose you are optimistic about the US economy and buy US dollars. If the US economy indeed improves and the dollar appreciates, selling your USD will bring you profit. This is the logic of "buy low, sell high"—exchange rates reflect a country's relative economic strength compared to others.

## What Are the Main Currencies Traded?

The forex market offers a wide range of currency pairs, but beginners usually trade **major currencies**—the most traded and representing the world's largest economies: USD, EUR, CAD, GBP, CHF, AUD, JPY, and NZD.

**Currency codes are three-letter abbreviations**: the first two letters represent the country, and the third letter indicates the currency. For example, USD (U=USA, D=Dollar). This system is called ISO 4217 currency codes, established by the International Organization for Standardization in 1973.

The most common nicknames for the US dollar are "Buck" or "Greenback." "Greenback" originated during the US Civil War in 1861—because the dollar's back was printed in a prominent green color, hence the name.

## Why Do So Many People Trade Forex? Five Major Advantages

**1. Extremely Low Trading Costs**
No commissions are required. Most of the time, there are no clearing or transaction fees; brokers profit from the bid-ask spread. Retail forex spreads are usually below 0.1%, and large trades can be as low as 0.07%.

**2. No Minimum Trading Size Restrictions**
Futures markets have fixed contract sizes (e.g., 5,000 ounces of silver), but the forex market is very flexible. Many brokers allow trading as small as 1,000 units of currency.

**3. 24-Hour Trading**
From Monday morning in Australia to Friday afternoon in New York, traders can trade forex anytime, anywhere. This flexibility is a huge advantage for global investors.

**4. Leverage to Amplify Profits**
Control large positions with a small amount of capital. For example, with 50:1 leverage, a $50 margin can control a $2,500 position; with $500, you can control $25,000.

**5. Extremely High Liquidity**
The enormous trading volume means traders can buy and sell instantly under normal market conditions. This is the core competitive advantage of the forex market.

## Summary

Forex is the largest and most active financial market globally. With low costs, high liquidity, flexible leverage, and 24/7 trading, forex has become an essential investment channel for investors worldwide. Understanding the basic concepts of forex is the first step to entering this market.