The forex market or the Foreign Exchange is the largest market in the world. In September 2004 the volume of trade in this market surpassed the $ 1.9 Trillion mark. Currently, the daily volume of Foreign Exchange traded per day is more than $3.2 Trillion.

So what is it that attracts so many people to this market?
It has mostly to do with the High Liquidity, Low Transaction Costs and Low Entry Barrier associated with this type of trading.
Forex trading also takes place on twenty four hours basis depending on where you are located.

Before you decide to start trading in currency, first familiarize yourself with the concepts, terminologies and characteristics of this market. This includes the Spread factor in Forex Exchange trading. The spread is the most vital transaction cost in forex trading. Any investor aiming to succeed in the market must know how the spread is presented in price quotations. They must also know its significance and the hidden details surrounding it.

The spread is basically the amount of “pips” between the bidding price and the asking price. It is what brokers use to make money on every forex trade that passes through their network.  
A pip is the smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point. For most pairs this is the equivalent of 1/100 of one percent, or one basis point.
The spread always revolves around the actual price that the forex broker is paying.  Thus, when you buy, you get one end of the spread and when you sell; you get the other end of it. By the time you finish trading, you will have compensated the spread.
Most Forex Exchange traders normally choose to trade forex with marginal accounts. You should therefore be familiar with the concept of marginal trading as well as its significance; and how to trade with it in relation to the leverage ratio.
When trading forex online, there are several types of orders that you can make to facilitate your traders. There is no central exchange in the forex market. Here, it is a network of computers that connects banks, brokers and traders together.
Online currency exchanges are essentially forex brokers which allow for delivery of the currencies traded. They will often provide the services of a currency converter, along with the opportunity to actually convert the currencies for a nominal fee. This fee is similar to the spread quoted in “pips”.

The advantages of online forex trading include:

Convenience- You can conduct trading from the relative comfort of your home or office.

Speed- Online forex trading is quite fast and you can be able to catch a preferred exchange immediately you see it. The forex market shifts constantly and it would be hectic to go back and forth to your bank or broker with the risk of loosing out on a good deal.

The forex market may be the largest market in theory but it is not the most popular. This is mainly due to the fact that most people know little or nothing concerning Forex Exchange trading; while others are simply scared to dive in unchartered waters.