How the Forex Market Works
Forex is short for foreign exchange: the market for buying and selling currencies. It is the world’s largest financial market. BIS final data put average daily turnover at about $9.5 trillion in April 2025.
Currencies Always Trade in Pairs
Currencies are quoted in pairs. A forex price shows how much of the second currency you need to buy one unit of the first.
What Moves Exchange Rates?
Currency prices shift constantly as supply and demand change. The biggest drivers are interest rates set by central banks, economic data such as inflation and employment, political events, and overall market sentiment. When a country’s outlook improves, demand for its currency tends to rise.
Global Trading Sessions
Forex trading runs across regional sessions, generally 24 hours a day during the business week. Activity often increases when London and New York are both open. Session times shift with local daylight-saving changes.
The Major Currencies
A small group of currencies accounts for much of global forex trading. The US dollar appears on one side of close to nine out of ten trades.
Majors, Minors and Exotics
Majors pair the US dollar with another big currency (EUR/USD, USD/JPY, GBP/USD), tightest spreads, deepest liquidity. Minors (crosses) pair two majors without the dollar, like EUR/GBP. Exotics pair a major with a smaller-economy currency; they can move sharply and usually cost more to trade.
Key Takeaways
- Forex is the world’s largest financial market, with about $9.5 trillion in average daily turnover in April 2025.
- Currencies trade in pairs; the price shows how much quote currency buys one unit of the base.
- Interest rates, economic data and sentiment are the main drivers of price.
- The market runs 24/5 across the Sydney, Tokyo, London and New York sessions.
- Pairs are grouped into majors, minors and exotics by liquidity and cost.
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