Currency Trading Basics: How the Forex Market Works

The foreign exchange market operates 24 hours a day, five days a week, across major financial centers in Sydney, Tokyo, London, and New York. Exchange rates are determined by supply and demand, influenced by interest rate differentials between countries, trade balances, political stability, and economic indicators like GDP growth and inflation. Central banks play a major role through monetary policy decisions and occasional direct market intervention. The most traded currency pair is EUR/USD, accounting for roughly 30 percent of daily volume. Unlike stock markets, forex has no central exchange - trades happen directly between participants through electronic networks.