Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world's currencies trade. The Foreign exchange market is open 24hours and 5 days a week, it is the largest and most actively traded market in the world. It trades more than $7 trillion on average in a day. The Foreign Exchange market is significantly larger than all the equity exchanges combined. The Forex market is an 'over the counter' or OTC market place which means that transactions do not centrally clear on an exchange. Forex trading is conducted by buying or selling one currency against another currency so when one currency is rising, another currency will fall. Currencies are always fluctuating because currency movements are dictated based on supply and demand. For example, US Dollar pair against Japan Yen (USDJPY). If the buying of USD demand is more than the supply will lead USD rise which mean there is less demand in buying Japan Yen than USD. You buy USDJPY when you think USD will raise in value against JPY; you sell when you think USD will drop in value against JPY.
CFD, known as a contract for difference between client and broker. CFD trading is a well-known form of derivative trading where one can trade without owning the underlying asset. CFD trading enables you to speculate on the price movements of financial assets such as forex, commodity or futures exchange. The advantages of CFD trading are you are able to trade by using leverages which increase your trading capital to amplify your trading profits (or losses). CFD trading allows short (sell) positions which provides you an opportunity to to profit when the market falls as well as rises.
Commodities are a tradeable physical asset. The most popular commodity trading are in energy and metal such as crude oil, gold, silver and other. The movement of commodities prices will affect the value of the underlying commodities. The impact of the price movement will come from the supply and demand. For example, the more people who drive a solar or electric car, the less the crude oil needed and it will significantly affect the crude oil prices.
The number of retail traders is growing every day with the use of forex trading platforms and the relative ease of access to these platforms via the internet. Retail traders typically trade for speculative purposes to make a profit and not for hedging purposes. They access the forex market indirectly either through a broker or a bank.
Governments and centrals such as European Central Bank, the Bank of England, and the Federal Reserve, are regularly involved in the forex market. Central banks affect the market when they increase or decrease in the value of currency by trying to control money supply, inflation or interest rates.
Companies need to use the foreign exchange market to pay for goods and services from foreign countries and also to sell goods or services in foreign countries.