What is FOREX?

The Foreign Exchange Market, better known as FOREX, was established in 1971 when fixed currency exchanges were abolished. Currencies became valued at ‘floating’ rates determined by supply and demand. The FOREX grew steadily throughout the 1970’s, but with the technological advances of the 80’s FOREX expanded from trading levels of $70 billion a day to the current level of $2.6 trillion.
The Foreign Exchange Market, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $2.6 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day, and American stock markets exchange about $25 billion a day, you can see how enormous the Foreign Exchange really is. It actually equates to more than eight times the total amount of the stock, futures and bonds markets combined.
Different countries use different currencies, however cross-border trading has to take place. The FOREX is therefore a vehicle driven by the need to move monetary payments across border and transfer funds and value from one currency to another. If the whole world used one currency there would be no need for the FOREX market. For example if a US restaurant needs to buy Italian cheese it needs Euros to pay the Italian cheese maker so it must be able to exchange US dollars for Euros. Likewise if the US restaurant makes the payment in US dollars the Italian cheese maker must be able to exchange the dollars into Euros. It's as simple as that.