Forex
WHAT IS THE FOREX MARKET?
The forex market enables participants — ranging from banks to individuals — to exchange currencies for purposes such as speculation and hedging. As the world’s largest financial market, it includes banks, corporations, central banks, investment firms, hedge funds, retail brokers, and private investors.
KEY TAKEAWAYS
The forex market enables banks, funds, and individual traders to trade currencies for speculation or hedging.
It operates around the clock — 24 hours a day, five and a half days a week — handling trillions in daily trading volume.
Although forex trading can deliver significant returns, it also carries a high degree of risk.
The market is divided into two main segments: the interbank market and the over-the-counter (OTC) market.
Many forex accounts can be opened with an initial deposit as low as $100.
Understanding the Forex Market
Unlike traditional financial markets, the forex market operates through a decentralized network of global brokers and digital platforms, rather than a centralized exchange. Some forex brokers also act as market makers, setting their own bid and ask prices for currency pairs, which may not always represent the most competitive rates available across the wider market.
The forex market functions on two main levels: the interbank market and the over-the-counter (OTC) market. In the interbank market, major financial institutions trade currencies for purposes such as hedging, balance sheet management, and client transactions. The OTC market, on the other hand, serves individual traders who buy and sell currencies through online platforms and broker services.
The forex market operates continuously from Monday morning in Asia until Friday afternoon in New York, allowing trading to occur without overnight pauses. Trading officially begins on Sunday at 5 p.m. EST and closes on Friday at 4 p.m. EST, providing access to participants across different global time zones.
Unlike stocks, bonds, and commodities — which generally close in the late afternoon EST — the forex market remains active throughout the week. However, certain emerging market currencies may observe scheduled trading breaks during the day.