Forex (meaning FOReign EXchange) is the acronym used for the international market where currencies are traded against each other. Because of this, the prices of assets on Forex are determined exclusively by the forces of supply and demand.

The Forex market can be thought of as a large exchange booth where currencies are bought and sold against each other. If you know, for example, that the dollar is going to increase in value, you buy dollars right now, wait for the currency to rise in value and then sell your dollars for another currency later at a higher price. This is essentially how things work on the Forex market. The only difference, of course, is that on the Forex market the volumes are much larger.

The fact that the price of currencies is in constant fluctuation is what makes earning money on the Forex market possible at all times. Since currencies are priced relative to each other, a loss of value in one currency necessarily entails a gain in another currency. This brings us to the idea of a currency pair, one most important concepts in trading currencies.

A currency pair simply represents the price of one currency in terms of another. For example, when it is said that "EURUSD is 1.2505" it means that 1 euro costs 1.2505 dollars. see more in foreign exchange trading basics