Forex Market

AAA

DEFINITION of 'Forex Market'

The market in which participants are able to buy, sell, exchange and speculate on currencies. The forex markets is made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The currency market is considered to be the largest financial market in the world, processing trillions of dollars worth of transactions each day.

INVESTOPEDIA EXPLAINS 'Forex Market'

The foreign exchange markets isn't dominated by a single market exchange, but involves a global network of computers and brokers from around the world. Central banks use their massive buying and selling capabilities to alter exchange rates through their open market activities and in many cases will do so not with profit in mind, but rather for any number of policy reasons. Forex brokers act as market makers as well, and may post bid and ask prices for a currency pair that differs from the most competitive bid in the market.

VIDEO

Loading the player...
RELATED TERMS
  1. Daily Cut-Off

    In the forex market, a particular point in time specified by ...
  2. Quote Currency

    The second currency quoted in a currency pair in forex. In a ...
  3. Forex Futures

    An exchange-traded contract to buy or sell a specified amount ...
  4. Currency Pair

    The quotation and pricing structure of the currencies traded ...
  5. USD

    In currencies, this is the abbreviation for the U.S. dollar. ...
  6. Base Currency

    The first currency quoted in a currency pair on forex. It is ...
RELATED FAQS
  1. What are the goals of covered interest arbitrage?

    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
  2. What is the 12b-1 fee meant to cover?

    A 12b-1 fee in a mutual fund is meant to cover the fees of companies and individuals through which investors of a fund buy ... Read Full Answer >>
  3. Which federal regulatory agencies approved and are now responsible for enforcing ...

    Five federal regulatory agencies approved and are jointly responsible for enforcing the Volcker rule. These agencies include ... Read Full Answer >>
  4. What is the purpose of the Volcker Rule?

    The Volcker rule limits two main types of activities by large institutional banks. Banks are prohibited from engaging in ... Read Full Answer >>
  5. What types of positions might a Chartered Financial Analyst (CFA) hold?

    The types of positions that a Chartered Financial Analyst (CFA) is likely to hold include any position that deals with large ... Read Full Answer >>
  6. What does a high information ratio tell an investor about a mutual fund?

    A high information ratio tells an investor that the sustained performance of a mutual fund's active manager is high and that ... Read Full Answer >>
Related Articles
  1. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  2. Forex Education

    Getting Started In Foreign Exchange Futures

    Learn how these futures are used for hedging and speculating, and how they are different from traditional futures.
  3. Forex Education

    The Greatest Currency Trades Ever Made

    These speculators took big positions - and scored huge profits - in the currency market.
  4. Options & Futures

    Getting Started In Forex Options

    Stocks are not the only securities underlying options. Learn how to use FOREX options for profit and hedging.
  5. Forex Education

    Commodity Prices And Currency Movements

    Find out which currencies are most affected by fluctuations in gold and oil prices, and improve your trading.
  6. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  7. Forex Education

    Using Elliott Wave To Trade Forex Markets

    Learn how to set up a trading plan using this method, to profit as a forex trader.
  8. Options & Futures

    Getting Started In Forex

    Before entering this market, you should define what you need from your broker and from your strategy.
  9. Forex Fundamentals

    Understanding the Floating Exchange Rate

    Floating exchange rate is the exchange rate between two currencies at any given time.
  10. Mutual Funds & ETFs

    How Private Equity and Hedge Funds are Taxed

    Private equity and hedge funds offer an appealing tax structure for those who can afford to invest in them. Here's why.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!