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Would you like an opportunity to gain financial independence while setting your own working hours and determining the nature of your work environment to suit your comfort level and personality? Both in a financial sense as well as physical sense? Well then, perhaps trading the Foreign Currency Exchange is for you. Forex, as it is commonly known, provides just such potential for the savvy trader who had done his homework.

The Forex market is where the trading of currencies of various countries takes place. It is where banks and other financial institutions facilitate the buying and selling of foreign currencies. The Forex market that exists today began evolving during the 1970's when, worldwide, countries gradually switched to a floating exchange rate system from the former exchange rate regime, which remained fixed according to the Bretton Woods scheme.

The Forex market is currently one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing.

The foreign exchange market is divided into levels of access, unlike the stock market where all participants have access to the same prices. At the summit is the inter-bank market which is made up of the largest investment banking firms. Within the inter-bank market, spreads, which describe the difference between the bid and ask prices, are razor sharp and usually unavailable, if not completely unknown to players outside the inner circle. The levels of access that make up the foreign exchange market are determined by the size of the “line,” which is the amount of money they're trading. The top-tier inter-bank market accounts for 53% of all transactions.

Following the inter-bank tier, there are usually smaller investment banks, followed by large multi-national corporations which need to hedge risk and pay employees in different countries, then large hedge funds, and even some of the retail Forex-metal market makers. Pension funds, insurance companies, mutual funds, and other institutional investors play an important role in financial markets in general, and in Forex markets in particular.

Because foreign exchange is an OTC market where brokers and dealers negotiate directly with one another, there is no central exchange or clearing house. The largest geographic trading centre is the UK, London in particular. The ten most active traders account for almost 80% of trading volume, according to the 2008 Euromoney Forex survey. These large international banks continually provide the market with both bid (buy) and ask (sell) prices.

The bid/ask spread is the difference between the price at which a bank or market maker will sell, and the price at which a market-maker will buy (“bid”) from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually 1–3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203 on a retail broker. The standard trading unit for most deals is usually 100,000 units of base currency, which is a standard “lot”. Mini lots of 10,000 units are also widely available.

The attraction of trading Forex for the individual private trader lies in the ease of operation. The Forex market is always open, always accessible. Much like an all night diner, ready to serve the needs and desires of the trader at all times. As the largest financial network in the world, its daily average turnover totals trillions of dollars. Imagine accessing this vast complex of financial resources any time of the day or night, regardless of your commitments or schedule. Consider your own home as your command centre, or conceivably any place with internet access. Perhaps even under the shade of an umbrella whilst vacationing. The possibilities are very attractive.

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