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The 'foreign exchange market' is a currency exchange market known as 'Forex'. Forex involves traders buying one currency and selling another. For instance, because many currencies do not have the same value, traders use the opportunity to import foreign goods for there businesses; by paying with a foreign currency thus earning money when selling the goods because they are selling them at their own higher currency. The way in which trading currency works is that their would effectively be a 'base currency' and a 'counter currency'. The base currency is in effect higher value then the counter currency and so the logic is that there needs to be more of the counter currency in order to equal to the value of just one unit of the base currency. These are known as a currency pair and are often referred to as one unit. When buying a currency pair the base currency is being sold whilst the counter currency is being bought. Furthermore when selling a currency pair, the counter currency is being sold and the base currency is being bought. Effectively this means that traders who are buying the base currency are affectively attaining a higher currency, whilst the businesses who are buying the counter currency are able to buy foreign goods for the foreign currency and make a profit by selling at their own higher currency.

Forex developed into what we see today in the 1970's and has further developed widely among many traders and speculators around the world. It has been thought unique to any other market because there is no central trading market and instead trading can take place 24 hours a day, 5 days a week over the counter. This in actual fact means that many businesses/traders can respond to how the financial market is reacting, every second of the day, to what is happening politically and economically throughout the world. Therefore there is a lot more liquidity within this market as traders have less chance at buying/selling at a loss. There are a number of many businesses trading in the foreign exchange market, and a lot of them consist of individual speculators who are generally only small to medium traders.

Open 24 hours a day, except on weekends, the Forex market is one of the largest and most liquid financial markets in the world. Trading it means going up against large central banks and small home based traders alike. Investing in currencies is one of the most riskiest, yet rewarding ways to make money speculating. The percentage of successful currency traders is very small. What attracts people to this market is also what bankrupts most of them.

The use of leverage in forex trading, the high volume and the fundamental factors, while they provide opportunities for great profit, they also provide a sure way to loss for an inexperienced trader. All you need to trade currencies is capital. Of course making profit while trading requires a lot more than that. Successful traders have a good trading system, well established money management rules, and a monk's discipline. Probably one of the most important factors in trading, and, ironically, the most overlooked, is the psychological factor. Many traders fail because they're not psychologically fit to tackle the markets. Most don't understand why they fail, since their method is sound. But their lack of discipline is what destroys their trading account. Make sure you're ready when you start trading.