Forex is a market where you can exchange one currency for another.When you "sell" a currency, a buyer buys it elsewhere.
Today, the exchange rate between the two currencies is important in foreign exchange transactions.Exchange rates can fluctuate, and it is these fluctuations that allow market speculators to profit from trading.
The foreign exchange market, which trades $6.5 trillion a day, is itself huge!By comparison, the New York stock exchange trades a paltry $22.4 billion a day.
The sheer size of the foreign exchange market attracts a wide variety of participants, including central Banks, investment managers, hedge funds, companies, brokers and retail traders, 90% of whom are currency speculators!
The value of each currency depends on its supply and demand relationship, thus determining the "exchange rate" between the two currencies, which fluctuates constantly.
The exchange rate itself is basically the difference between one currency and another.
It is this exchange rate that determines how much you can exchange one currency for another, such as how many pounds you can exchange for euros.
Now, when you trade foreign exchange, you are trading currency pairs.So the trade will involve two different currencies, and you will speculate on the value between them.