The foreign exchange market, which is usually known as “forex” or “FX,” is the largest financial market in the world.
Compared to the $22 billion a day volume of the New York Stock Exchange during much of 2015, the foreign exchange market looks large with its $5 trillion a day in trade volume.
How does forex work? “Imagine a situation where the U.S. dollar is expected to weaken in value relative to the euro, said Chris C. Yu, CEO of Polaris Capital Partners, a forex investment management firm. “A forex trader in this situation will sell dollars and buy euros. If the euro strengthens, the purchasing power to buy dollars has now increased. The trader can now buy back more dollars than they had to begin with, making a profit.”
Currency trading has been around since ancient times. For a brief history of all things FX, check out the infographic below: