Introduction

The Foreign Exchange Market is vast in size and scope and exists to fulfil a number of purposes
ranging from the finance of cross-border investment, loans, trade in goods and services and of
course, currency speculation. Trading may be for "spot" or "forward" delivery. A spot contract is a
binding obligation to buy or sell a certain amount of foreign currency at the current market rate. A
forward contract is a binding obligation to buy or sell a certain amount of foreign currency at a
pre-agreed rate of exchange, on or before a certain date.

From Wikipedia

The foreign exchange market (currency, forex, or FX) trades currencies. It lets banks and other institutions easily buy and sell currencies.

The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S.dollers.

In a typical foreign exchange transaction a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market started forming during the 1970s when countries gradually switched to floting exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Wood System.

The foreign exchange market is unique because of

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  its trading volumes,
  
  
  
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  the extreme liquidity of the market,
  
  
  
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  its geographical dispersion,
  
  
  
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  its long trading hours: 24 hours a day except on weekends (from 20:15 UTC on Sunday until 22:00 UTC Friday),
  
  
  
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  the variety of factors that affect exchange rates .
  
  
  
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  the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
  
  
  
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  the use of leverage