FX trading is the activity of buying one currency and selling another, and it takes place in the foreign exchange market, which the main entry describes in detail. Every trade involves a currency pair, since one currency is always priced in terms of another. Trading runs around the clock from Monday morning in Asia to Friday evening in New York, mostly between dealers and their clients without a central exchange.
Participants trade for different reasons. Companies and investors convert currency for trade and investment and hedge the resulting exposures. Banks make markets, quoting prices to clients and managing the positions that result. Hedge funds and other speculators take views on exchange rates, including strategies such as the carry trade. Central banks trade to manage reserves or to influence their currency.
The main instruments are the FX spot transaction for near-immediate delivery, the FX forward contract for delivery at a later date, and the FX swap, which combines the two and accounts for the largest share of turnover. Exchange-traded currency futures and options are also used. Most trading is electronic, and a large part is carried out by algorithms.