Key Points about Forex:

1. Purpose:
   • Individuals, businesses, and governments use Forex to exchange one currency for another (e.g., USD to EUR).
   • It facilitates international trade and investment.
2. Participants:
   • Banks
   • Central banks
   • Corporations
   • Hedge funds
   • Retail traders (individuals trading through brokers)
3. How It Works:
   • Currencies are traded in pairs (e.g., EUR/USD, GBP/JPY).
   • The first currency in the pair is the base currency, and the second is the quote currency.
   • Prices fluctuate based on supply and demand, economic indicators, interest rates, geopolitical events, etc.
4. 24-Hour Market:
   • Forex operates 24 hours a day, five days a week, due to different time zones (Tokyo, London, New York).
5. Leverage and Risk:
   • Traders often use leverage, meaning they borrow money to control larger positions.
   • This increases both potential profit and risk.

  Global Currency Exchange: Forex (Foreign Exchange) is the worldwide marketplace for buying and selling currencies.

  Largest Financial Market: It’s the biggest and most liquid financial market globally, with trillions of dollars traded daily.

  Decentralized (OTC): It operates over-the-counter (OTC) directly between participants, not on a central exchange.

  24/5 Operation: The market is open 24 hours a day, five days a week, due to global financial centers.

  Traded in Pairs: Currencies are always traded in pairs (e.g., EUR/USD). The price shows how much of the second currency is needed to buy one unit of the first.

  Purpose: Used for international trade, investment, tourism, speculation, and hedging.

  Price Drivers: Exchange rates are influenced by interest rates, economic data, political stability, and news events.

  Leverage: Many traders use leverage, which can amplify both profits and losses.

  High Risk: While potentially profitable, Forex trading is very risky, and most retail traders lose money. Requires education, strategy, and risk management.

1. Spot Market (Cash Market)

🔹 What it is: The most common and simplest form of Forex trading.
🔹 How it works: Currencies are bought and sold instantly at the current market price (“on the spot”).
🔹 Settlement time: Usually T+2 days (trade date + 2 business days).

✅ Best for: Short-term traders who want quick execution and market price.

2. Forward Market

🔹 What it is: A private agreement between two parties to exchange currency at a future date at a pre-agreed rate.
🔹 Traded where: Over-the-counter (OTC), not on centralized exchanges.
🔹 Customizable: Parties decide the amount, date, and price.

✅ Best for: Hedgers (like importers/exporters) who want to lock in future exchange rates.

3. Futures Market

🔹 What it is: A standardized contract to buy/sell a currency at a future date and fixed price.
🔹 Traded where: On centralized exchanges (e.g., CME – Chicago Mercantile Exchange).
🔹 Legally binding: Must follow exchange rules.

✅ Best for: Traders who prefer regulation, transparency, and reduced counterparty risk.

4. Swap Market (Currency Swaps)

🔹 What it is: Two parties exchange principal and interest payments in different currencies.
🔹 Use case: Often used by businesses or banks for hedging and cash flow management.
🔹 Longer-term agreements than spot or forwards.

✅ Best for: Large institutions needing long-term currency exposure management.

5. Options Market

🔹 What it is: A contract that gives the right (but not obligation) to buy/sell currency at a set price before a certain date.
🔹 Flexible tool: Traders can profit from price movements with limited risk.

✅ Best for: Strategic hedging or limited-risk speculation.

🧾 Summary Table