What is forex?
Quite simply, it’s the global financial market that allows one to trade currencies.
If you think one currency will be stronger versus the other, and you end up correct, then you can make a profit.
If you’ve ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange the money you have in your wallet into the currency of the country you are visiting.
You go up to the counter and notice a screen displaying different exchange rates for different currencies.
An exchange rate is the relative price of two currencies from two different countries.
You find “Japanese yen” and think to yourself, “WOW! My one dollar is worth 150 yen?! And I have ten dollars! I’m going to be rich!!!”
When you do this, you’ve essentially participated in the forex market! You’ve exchanged one currency for another.
Or in forex trading terms, assuming you’re an American visiting Japan, you’ve sold dollars and bought yen.
Before you fly back home, you stop by the currency exchange booth to exchange the yen that you miraculously have remaining (Tokyo is expensive!) and notice the exchange rates have changed.
It’s these changes in the exchange rates that allow you to make money in the foreign exchange market.
What is forex?
The foreign exchange market, which is usually known as “forex” (by retail traders) or “FX” (by institutional traders), is the largest financial market in the world.
It is a global, decentralized market where the world’s currencies change hands.
Due to the wide range of market participants, including central banks, financial institutions, corporations, hedge funds, algorithmic trading systems, and individual traders, exchange rates change by the second, so the market is constantly in flux.
Only a tiny percentage of currency transactions happen in the “real economy” involving international trade and tourism, like the airport example above.
Instead, most of the currency transactions that occur in the global foreign exchange market are bought (and sold) for speculative reasons.
Currency traders (also known as currency speculators) buy currencies hoping that they will be able to sell them at a higher price in the future.
How big is the forex market?
Compared to the New York Stock Exchange (NYSE), the foreign exchange market looks absolutely ginormous with its $9.6 TRILLION a day trade volume.
That’s trillion with a “t”.
Let’s take a moment to put this into perspective using monsters…
The largest stock market in the world, the New York Stock Exchange (NYSE), trades a dollar volume of roughly $80 billion each day across about 1.5 billion shares.
If we used a monster to represent the NYSE, it would look pretty intimidating. Looks like it works out. Some may even find it sexy.
You hear about the NYSE in the news every day… on CNBC… on Bloomberg… on BBC… heck, you even probably hear about it at your local gym. “The NYSE is up today, blah, blah”.
When people talk about the “market”, they usually mean the stock market. So the NYSE sounds big, it’s loud, and likes to make a lot of noise.
But if you actually compared the NYSE to the forex market, it would look puny. It would look like this…
Like a chihuahua barking at a whale. The currency market is over 100 times BIGGER in terms of daily turnover! It is HUGE!
The cryptocurrency market? Even punier.
Check out the graph of the average daily trading volume for the forex market, the US stock market in aggregate, the Tokyo Stock Exchange, and the London Stock Exchange:
But hold your horses, there’s a catch!
That huge $9.6 trillion number covers the entire global foreign exchange market. This includes things like FX swaps, outright forwards, options, and other instruments used mostly by big banks and institutions.
The “spot” market, which is the part of the currency market that’s most relevant to FX traders, is smaller at about $3 trillion per day.
And then, if you just want to count the daily trading volume from retail traders (that’s us), it’s even smaller.
It is very difficult to determine the exact size of the retail segment of the FX market. Estimates vary widely depending on how “retail” is defined.
But the BIS 2025 survey suggests retail-driven turnover may account for roughly 2.5-6% of overall daily FX trading volumes, or somewhere in the range of $200-500 billion per day.
So you see, the forex market is definitely huge, but not as huge as the others would like you to believe.
Don’t believe the “forex is a $9.6 trillion market” hype! The huge number sounds impressive, but it’s a bit misleading.
We don’t like to exaggerate. We just keepin’ it real.
It (almost) never sleeps
Aside from its size, the market also rarely closes! It’s open virtually around the clock.
The forex market is open 24 hours a day and 5 days a week, only closing down during the weekend. (What a bunch of slackers!)
So unlike the stock or bond markets, the forex market does NOT close at the end of each business day.
Instead, trading just shifts to different financial centers around the world.
The day starts when traders wake up in Auckland/Wellington, then moves to Sydney, Singapore, Hong Kong, Tokyo, Frankfurt, London, and finally, New York, before trading starts all over again in New Zealand!
It’s also worth noting that more and more of this trading is handled by algorithms and automated systems rather than humans clicking buttons. The forex market has become increasingly electronic and high-speed over the years.
To help you know what’s happening in the forex market every day, we provide an FX Market Snapshot tool. It’s a visual guide that summarizes current market activity, allowing traders to quickly see and understand which major currencies are strong or volatile, and which currency pairs have gained or lost the most.
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In the next section, we’ll reveal WHAT exactly is traded in the forex market.