Foreign exchange, Foreign currency exchange or Forex, each term bears the same meaning where the market one currency trades for another currency. In simple terms you buy another currency while paying an appropriate price. As an example, think you are going to America for a vacation. You can't make transactions with Rupees in America since their official currency is US Dollars. So you need American Dollars to buy before you step in there. What you do is going to currency trading agency and buy some US Dollars by paying relevant price in Rupees. This rate between two currencies are depend on the financial strength and many other factors of those countries and changes minute to minute. Think you bought US Dollars when the rate is 110 Rupees per one USD. after few weeks when you come back the rate has increased up to 113Rupees per one US Dollar. So when you return to Sri Lanka and exchange US Dollars back to Sri Lankan Rupees you get a 3Rupees profit per each US Dollar. This phenomena is used buy currency trader to earn profit with highly liquid currency pairs by buying and selling currencies. These type of trades are commonly known as Forex which bears the meaning of Foreign Currency Exchange.