different kinds of currencies in the world, most of the international payments and forex trades are made in U.S. dollars, Yen or Euro. Other currencies that are popularly traded include the British pound, Swiss franc, Australian dollar, Swedish krona, and Canadian dollar.

Forex or "foreign exchange," is the largest financial market in the world with more than $5 trillion world currencies being traded every day. It is an activity that occurs continuously around the world for 24 hours a day, five days a week.

Although Forex trading involves many forms of risks, it provides valuable functions for investors and institutions. Constantly fluctuating exchange values, leverage, and external market forces all create an environment that makes it challenging for forex traders.

Currency Value Fluctuations

Currency values fluctuate continuously, for many reasons, and it could be due to political or economic news. The proposed exit Great Britain's from the European Union is an example. At times, the market can drive value changes itself. Domestic and external events may force changes in currency value on the forex. Although these fluctuations are not as bad as such, it is the inability of the trader to foresee these changes correctly that creates the risk.

To give an example, when the U.S. Dollar is strong, companies in the United States may import more European products, which had become correspondingly less expensive. They exchange US dollars for Euros to pay for these products. When a large number of dollars are exchanged for euros over a short period, it increases the demand for the Euro. As a result, the value of the Euro increases while the value of the US Dollar relative to the Euro decreases.

Investor Types and Risk Levels

Individual retail investors, financial institutions, and corporations doing business internationally trade in currencies. While retail investors and banks trade in currencies to make profits, corporations usually trade in their normal course of buying and selling goods and services internationally.

Currency trading being a highly leveraged affair, anyone with a small amount of cash investment and some amount of margin can trade very large amounts of Forex.