Forex trading, also known as foreign exchange or FX trading, involves the buying and selling of currencies in a global marketplace. The goal is to profit from changes in currency exchange rates. The forex market is the largest and most liquid financial market in the world, with daily trading volumes exceeding $6 trillion. Here's how it works: 1. Currency Pairs: In forex trading, currencies are traded in pairs, such as EUR/USD (Euro/US Dollar) or GBP/JPY (British Pound/Japanese Yen). The first currency is called the "base currency," and the second is the "quote currency." The price of the pair shows how much of the quote currency is needed to buy one unit of the base currency. 2. Trading: Traders buy one currency and sell another simultaneously. For example, if a trader believes that the Euro will rise against the US Dollar, they would buy the EUR/USD pair. If the Euro increases in value relative to the Dollar, the trader makes a profit. 3. Market Participants: The market consists of various participants, including governments, central banks, financial institutions, corporations, and individual traders. These participants trade currencies for various reasons, including speculation, hedging, and international trade. 4. Leverage: Forex trading often involves the use of leverage, allowing traders to control a larger position with a smaller amount of capital.