Significance

• The value of a country's currency relative to the rest of the market is a good indication of not only its general economic strength, but its international status and its internal stability. For example, in the wake of an act of violence or war, a country's economy tends to drop because there is a panic mode that sets in. While this panic reaction is less true for the countries with greater economic strength and international standing (like the US and UK) it still shows an impact. It has also been theorized that it most closely enacts the principal of perfect competition, and as such is something of an economic marvel.
  
  

Function

• Currency exchange serves to make money compatible between borders, and also to facilitate trade and investment. It establishes relative values that fluctuate based primarily on a desire to buy the currency, falling perfectly into a "supply and demand" paradigm. Thus, if the "dollar is down" in the global economy, it means people are less interested in buying the currency and would prefer to buy another currency for the strength of the investment.
  
  

Time Frame

• Currency exchange is the only international market to operate on a 24-hour time frame. Money is always being traded and the main trading centers, such as London, New York and Tokyo, are open for throughout the week. Because of this you can follow the exchange rate and see it constantly changing day and night.
  
  

Features

• The international currency exchange market features unique qualifiers, like it's 24-hour clock, it's massive liquidity, the variety and sheer volume of traders, the vast amount of funds it deals with (over 1.74 TR in daily "swaps" of foreign currency exchange) and the low profit margin of the market itself.
  
  

Types

• There are many types of foreign currency exchanges, like a "spot" (a transaction with a delivery time of two days that involves cash rather than contracts) a "future" (a time delayed contract of usually three months with an agreed exchange rate), a "forward" (a less structured future, with great flexibility on date), "options" (where the trader essentially goes into an open-ended forward, where the seller can choose to sell at that date or not, depending on the market), and a "swap" (two traders exchange currencies for an agreed upon time and then swap back). Swaps are the most common, but options command the most money in the foreign exchange market.