Forex trading, at its most basic level, is comparable to the currency exchange you could do when traveling abroad: A trader purchases one currency and sells another, and the exchange rate swings frequently as a result of supply and demand.

The foreign exchange market, a worldwide marketplace operating 24 hours a day from Monday to Friday, is where currencies are transacted. Forex trading takes place entirely over the counter (OTC), which means there is no physical transaction and the market is supervised by a worldwide network of banks and other financial organizations.

The forex market is dominated by institutional traders, such as those employed by banks, hedge funds, and multinational organizations. These traders are not always interested in acquiring actual custody of the currencies; they may be speculating on or hedging against future exchange rate swings.