The Off-Exchange Retail Foreign Currency market, also known as Forex, is the simultaneous purchase and sale of one currency for that of another। Since most world currencies do not have a fixed exchange rate, exchange rates are always fluctuating। The off-exchange retail foreign currency market, in conjunction with the interbank market, is one of the largest financial markets in the world!
The Forex market as it is known today started with the end of the gold standard in 1971, and was limited only to large banks and corporations. After the Commodity Futures Modernization Act of 2000 currency trading became available to retail investors. However, with its minimum $100,000 contract size and scant regulation, investing in currencies was not commonplace. As the market grew and evolved, regulation required high net-capital requirements for online Forex brokers, and Interbank FX started offering nano-lots which reduce the once $100,000 minimum contract size down to $100.
Currencies are traded in pairs. For example, EUR/USD (Euro vs. U.S. Dollar) or USD/JPY (U.S. Dollar vs. Japanese Yen). The most commonly traded currencies are called the "majors", and include the US Dollar, Euro, Japanese Yen, British Pound, Canadian Dollar, Swiss Franc and Australian Dollar. Forex trading begins every day in Sydney, moves to Tokyo, followed by Europe and finally the Americas.
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