Understand how Forex works: the world's largest financial market

2025-12-24 23:34:26

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Have you ever stopped to think about the size of the foreign exchange market? The numbers are truly impressive. With a daily trading volume of US$ 6.6 trillion, Forex surpasses any other global financial market. To put this into perspective, the New York Stock Exchange (NYSE) moves only US$ 200 billion per day. The difference is staggering.

What exactly is Forex?

Forex, also known as FX or foreign currency exchange, is the decentralized market where individuals and companies trade international currencies. If you’ve traveled to another country, you’ve participated in it. It’s not a specific physical place – it’s a global network of trading that operates 24 hours a day, 5 days a week.

A practical example: imagine you are traveling from Taiwan to the US. At the airport, you exchange 10,000 of your local currency (NTD) for US dollars (USD). If the exchange rate is 0.034, you receive 3,400 USD. In this simple act, you have become a participant in the Forex market.

Where is the real money?

The foreign exchange market is enormous, but it’s important to understand its composition. The “spot” segment – the one most relevant to regular traders – moves about US$ 2 trillion daily. The retail segment, involving individual traders like us, accounts for only 3% to 5% of the total: roughly US$ 200 to 300 billion per day.

Why does Forex work this way?

Most transactions do not involve tourism or international trade. On the contrary: currency speculators dominate the scene. Traders buy currencies expecting to sell them at a higher price in the future. It’s this speculative dynamic that keeps the market constantly moving.

The market never sleeps

A unique feature of Forex is that it’s always operational. While you sleep in New York, traders are awake in Tokyo. The market follows the global cycle: it starts in Auckland/Wellington, moves through Sydney, Singapore, Hong Kong, Tokyo, Frankfurt, London, and returns to New York before starting again in New Zealand. In this way, Forex operates continuously from Monday to Friday, without interruptions.

Exchange rates change every second, keeping this market in perpetual flow and offering constant opportunities for those who know how to operate it.

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