A simpler way to explain the main purpose of Forex, known as the ‘foreign exchange market’ is to compare it to a person/holidaymaker going on holiday abroad. It is true that when you are going away to a foreign country, with a different currency, you hope to get a better exchange rate that will allow purchasing goods, souvenirs and other luxuries at a low value then if you were to buy them in your home country. Therefore if you were travelling to America, trading amount of British pounds for the same value of American dollars may in effect get you twice as much in the number of there currency value to spend whilst in America. This in fact means that anything you buy in America will be paid for in American dollars and could be considered a bargain due to the fact that the value of the currency is likely to be lower then that of the British pound.

This idea is in a way similar to that of the foreign exchange market, as foreign currencies are traded between investors and businesses in order to get a better value rate when potentially buying goods with the same traded currency. Although the value of currency between countries is not always fluctuating drastically it is still always changing due to general political and economic reasons of each nation. As Forex is open for trading five days a week; every hour, many traders and investors are less likely to be affected by these political and economic states as they can react almost imminently to what is going on throughout the world.

The floating currency value is what gives the foreign exchange market, unlike other investment markets, a large volume of investors. Many other investment markets work on fixed rates and therefore do not have as greater chance of a larger buying power despite having fixed rates that can ensure a stationary value of trading. Forex is however unique because not only does it have big investments bankers and businesses but it can offer small businesses with lower start up cash to exchange and trade currency as well.

Furthermore forex is still considered unique and a lot more ‘modernised’ then other stock markets as the way in which the trading functions is a lot different and somewhat easier. For example, forex does not have single trading platform, instead trading can take place anywhere around the world, over the counter, through the internet etc. This added to the fact that trading hours are 24 hours a day and 5 days a week, means that a lot more buying and selling is happening and many traders do not have to hang around before making there next move. This is effectively the main reason why so much money is traded and why the volume and margins of buying power are so high compared to other stock and exchange markets. Furthermore the cutting out of middlemen is easier and faster for investors to have there order forms filled out and at much lower cost. So it seems whilst this could be considered quite modernised it is in actual fact a lot more beneficial in the ways that decisions and reactions can be made almost instantly to what is going on around the world. Consequently this is extremely important for the foreign exchange market as everybody knows, any major political or economical changes that happen in any part of the world could have a greater effect on the value of certain currencies, and actions must be made in order to save him or herself from loss.