Foreign exchange (or forex) is simply the exchange of a particular currency into another currency. For instance, if the currency of a country is valued at $100,000 then the price of that particular currency would be determined by the exchange rate between that country and another. The value of a currency in the global market is largely determined by the current exchange rate of that currency with other major currencies. The main reason why forex occurs is to facilitate trade among various countries by allowing one country to sell currency to another at a higher value than what it currently costs for the same item in their country.
If you have any knowledge about economics, then you should be able to understand how foreign exchange works. Basically, there are two types of foreign exchange: the spot market and the futures market. In the spot market, you deal with actual products - such as foreign currency - and you exchange it for another currency, at a prearranged exchange rate. With the futures market, on the other hand, you deal with assets and securities but instead of physical products, you trade financial products such as foreign currency, stock indexes, and indices, which are bought and sold on a future date and agreed upon at a preset date in the future. Futures contracts typically specify the date in the future when the asset or security will be delivered, and they may specify a quantity, the rate of exchange, and other market-driven factors.
While foreign exchange has been shown to have significant influences on the economies of countries, like most economic decisions, foreign exchange trades are typically made based on a few different factors. One of the biggest factors in foreign exchange trades is speculations on whether the value of a particular currency will rise or fall. Other factors that can have a huge effect on the exchange rates include expectations of government policies, interest rates, inflation, and political developments in various countries. As you can see, understanding how foreign exchange works is important if you want to use this market to your own financial advantage. Fortunately, you can get the information you need to begin trading foreign currency by studying a number of different online courses and tutorials, or by enrolling in an exchange course at a local university or college.