Forex, or foreign exchange, may be defined as a network of buyers and sellers who exchange currencies at a predetermined price. It is the process through which people, businesses, and central banks change one currency into another; if you have ever traveled overseas, you have most certainly made an FX transaction.

While some foreign exchange is done for practical reasons, the great majority of currency conversion is done to make a profit. Because of the volume of money converted each day, the price swings of some currencies can be quite erratic. This volatility is what makes forex so appealing to traders: it increases the possibility of large earnings while simultaneously raising the danger.

Unlike stocks or commodities, forex trading occurs directly between two parties in an over-the-counter (OTC) market rather than on exchanges. The forex market is managed by a global network of institutions located in four major forex trading hubs in distinct time zones: London, New York, Sydney, and Tokyo. You may trade forex 24 hours a day since there is no central place.

The first currency specified in a forex pair is known as the base currency, while the second currency is known as the quote currency. The price of a forex pair is how much one unit of the base currency is worth in the quotation currency.