Forex Markets

An Introduction to Forex Markets

We have all heard of Wall Street, and for most of us, that is where our knowledge of trading markets begins and ends. However, there are not only many other stock markets around the world, but entirely different types of financial markets — and the largest of them all is the foreign exchange market, commonly known as forex or FX. With an average daily turnover of $9.6 trillion according to the Bank for International Settlements, forex dwarfs the stock market, the bond market, and the commodities market combined.

The forex market is where currencies are bought and sold against one another. Every time you exchange money at an airport or a bank sends a wire transfer overseas, a forex transaction takes place. But the vast majority of forex volume is speculative — traders and institutions buying and selling currency pairs to profit from fluctuations in exchange rates driven by interest rate decisions, economic data, geopolitical events, and market sentiment.

Unlike the stock market, which operates through centralized exchanges like the NYSE or NASDAQ, the forex market is decentralized — it operates through a global network of banks, brokers, and electronic platforms, open 24 hours a day, five days a week. Trading sessions rotate through Sydney, Tokyo, London, and New York, meaning that somewhere in the world, currencies are always being traded. This round-the-clock accessibility is one of the key reasons forex has become so popular with individual traders.

In terms of profitability, there is no other market that offers such enormous potential to make a profit — and make it quickly. The combination of high liquidity, leverage (which allows traders to control large positions with relatively small capital), and constant price movement creates opportunities that other markets simply cannot match. However, this same leverage means losses can accumulate just as rapidly, which is why education, practice with demo accounts, and disciplined strategies are essential before trading with real money.

While trading market popularity comes and goes, the forex market has established itself as a permanent fixture of global finance. With the ability for not only deep-pocketed institutional investors but also individual traders with limited starting capital to participate in this highly liquid and exciting market, forex looks like it is here to stay. The key is approaching it with proper education, realistic expectations, and respect for the risks involved.

The Scale of the Forex Market

The 2025 BIS Triennial Central Bank Survey confirmed that global forex turnover reached $9.6 trillion per day in April 2025 — a 28% increase from $7.5 trillion in 2022. To put this in perspective, the entire New York Stock Exchange trades roughly $25 billion per day. The forex market moves that amount every four minutes. This extraordinary liquidity means that large orders can be executed without significantly moving the price, spreads remain tight, and traders can enter and exit positions at virtually any time during the trading week.

The market's participants form a hierarchy. At the top sit the major banks — JPMorgan, Deutsche Bank, Citi, UBS, and HSBC collectively handle a significant share of all forex volume through the interbank market. Below them are hedge funds, pension funds, central banks, and multinational corporations hedging currency exposure. At the base are retail traders — individuals trading through online brokers — who account for approximately 2.5% of total daily volume. Despite this small share, the retail forex market still represents roughly $240 billion in daily activity.

How the Forex Market Is Structured

Unlike stock markets that operate through centralized exchanges, forex is an over-the-counter (OTC) market — trades occur directly between parties through a global electronic network rather than on a single exchange floor. This decentralized structure is what enables 24-hour trading: as the Sydney session closes, Tokyo is in full swing; as Tokyo winds down, London opens; and as London closes, New York carries trading into the evening before Sydney opens again. This continuous rotation means that currency prices respond to economic data, central bank announcements, and geopolitical events in real time, around the clock.

The major trading sessions overlap at key times that produce the highest liquidity and tightest spreads. The London-New York overlap (8:00 AM to 12:00 PM EST) is the most active period, handling approximately 50% of all daily forex volume. The Tokyo-London overlap and the Sydney-Tokyo overlap are also active periods. Traders who focus their activity on these high-liquidity windows generally experience better execution and lower trading costs.

Currency trading is always done in pairs — you simultaneously buy one currency and sell another. The most traded pairs involve the U.S. dollar, which appears on one side of 89.2% of all forex transactions. The seven major pairs (EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, and NZD/USD) account for approximately two-thirds of total forex volume. Beyond these, dozens of minor and exotic pairs offer additional trading opportunities, though with wider spreads and less liquidity.

Important disclaimer: This content is for informational and educational purposes only and does not constitute financial advice, investment advice, or a recommendation to buy, sell, or trade any financial instrument. Forex trading involves substantial risk of loss — between 70-80% of retail investor accounts lose money when trading forex and CFDs according to data from the FCA, ESMA, and CFTC. Past performance is not indicative of future results. You should not trade with money you cannot afford to lose. Always consult a qualified financial advisor before making investment decisions. aboutforexmarkets.com is not a licensed financial advisor, broker, or dealer.

Last reviewed and updated: March 2026