The foreign exchange market is the largest financial market in the world, in terms of trading volume. Known by several other names, including forex, FX or the currency market, every day over $5 trillion worth of currencies are traded across the world. Because of the volume of trades, price movements can happen very quickly, making currency trading not only the largest financial market in the world but also one of the most volatile.
Currencies are traded in major financial centres across the world, including London, New York, Tokyo, and Hong Kong. This is done through a global network of banks and used by businesses, individual investors and central banks to convert one currency into another. While part of those transactions are executed for commercial purposes, to buy goods and services in a foreign currency or convert proceeds back into local currency, the vast majority of currency transactions are undertaken with the aim to try to achieve a profit.
The value of a currency tends to reflect the macroeconomic situation in the country they represent. If the economy of a country is improving, the currency of that particular country is likely to strengthen. Alternatively, if the economic situation deteriorates, the currency is likely to weaken. Trading currencies is a speculation on the economic health of one country compared to another.
Why trade forex?
There are many benefits and advantages of trading forex. Besides being the most traded financial market in the world, unlike the stock market, the forex market is open 24 hours a day, 5 days a week, from Monday through to Friday. This provides a great opportunity for traders to trade at any time of the day or night.
For traders, in general the best potential trading opportunities can be those related to the major currencies because they are traded more frequently, and therefore can be more liquid. For many traders, the best time to trade is when the market is most active.
New to trading?
Our range of Trading Guides provide a good starting point for beginners. From an in-depth introduction to trading the largest financial market in the world and the different types of major, minor and exotic currency pairs to understanding pips, spreads and basic forex terminology, our trading guides are ideal if you are new to trading of if you want to refresh your knowledge. If you are looking for more information on trading terminology, please visit our Glossary page.
Trade forex with Capital Index
As a Capital Index client, you can trade forex with up to 200:1 leverage and fast, reliable execution across 55 different currencies pairs. Take advantage of market movements across major, minor and some exotic currencies.