If you are trading Forex, you are trading on the foreign exchange. On the foreign exchange, you are trading world currencies against each other. The Forex market is often referred to as the 'FX market'. The Forex market is the most liquid market in the world, with over 6 trillion dollars traded on the market every single day! It's bigger than the stock market!
Forex trading is the buying and selling between a forex 'currency pair' including the major currencies, the minor currency pairs and the exotics currency pairs. There are over 100 currency pairs and the most popular currency is the USD.
The most frequently traded forex pairs are: EUR/USD, USD/JPY, GBP/USD, USD/CAD.
Minor pairs that do not include the U.S. Dollar. These pairs typically contain one of the other three major currencies: EUR, GBP, or JPY. Finally, exotic pairs include currency pairs from countries with a developing market presence, such as Sweden, Norway, or Mexico.
The Forex market is an excited and fast-paced market, hence, it appeals to a lot of 'retail traders'. You probably have participated in the Forex market without even realising it. For example, if you are from the United Kingdom and you plan to go on holiday to the United States, you will of course need dollars (USD) to spend.
You might go online or to a currency counter to purchase USD and you would be doing so at the current exchange rate. Then, when you return home from your holiday, you might have USD left. You return to the currency counter and ask to change your leftover USD back into GBP, but whilst you have been away, the currency exchange rate has moved, meaning you can get back more GBP than you had originally used to purchase your USD, therefore, you have made a profit from your exchange.
The Forex market is unique as there is no central marketplace. This means all transactions are done electronically across networks. Also, unlike other markets, the Forex market can be traded around the clock 24 hours a day, 5 days a week (Monday - Friday).
Andrew Lockwood, an experienced Forex trader explains what trading Forex is in this short video.
You can also adopt different trading styles to suit your needs. For example, you may find that you are more of aSwing Trader or a Scalper.