Suppose you live in the U.S. and plan to travel to Europe for a foreign trip. Therefore, you need to sell your dollar and buy euro currency for this trip. So you go to a shop (probably a currency exchange) so that you can buy the euro currency, and now a question arises. How many euros do you get for every one dollar you give?
Therefore, you need to know this rate. In other words, this rate is the same as the euro against the dollar. But who or what institution determines this rate? This rate is determined in the Forex market. Like any other market where buying and selling is made and the price of an asset arises, there is also a market for different currencies where the price of each currency is determined against another. This market is called the Forex market.
Now you have to go to this market, find the price of the euro, give your dollar and get the equivalent of the euro. For example, on that day the rate of euro to dollar is 1.27, in simple terms, i.e. if you give 1 euro to the exchange, I will give you $1.27. Now you want to convert your dollar to euros, so at this rate you will give all your dollars and get euros. This rate is called the exchange rate.
In a nutshell: The Forex market is the market for currency pair and pricing against each other and is considered the largest financial market in the world. Now you may be asking the question of where this market is and what else can be bought and sold in this market, except currencies? Close this page and click next title.