The foreign exchange market is unique because of
- its superior liquidity
- its huge trading volume
- the large number of, and variety of, participants in the market
- its geographical dispersion
- its long trading hours: 24 hours a day
- significantly lower transaction costs compared to exchange traded contracts
- allowing for trading opportunities in both Up and Down trending markets

According to sources, average daily turnover in traditional foreign exchange markets was estimated at $3.21 trillion.

This $3.21 trillion in global foreign exchange market "traditional" turnover was made up of the following broken down as follows:
-   $1,005 billion in spot transactions
-   $ 362 billion in outright forwards
-   $1,714 billion in forex swaps
-   $129 billion estimated gaps in reporting

In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.

Average daily global turnover in traditional foreign exchange market transactions totalled $2.7 trillion in April 2006. Overall turnover, including non-traditional foreign exchange derivatives and products traded on exchanges, averaged around $2.9 trillion a day. This was more than ten times the size of the combined daily turnover on all the world’s equity markets. Foreign exchange trading increased by 38% between April 2005 and April 2006 and has more than doubled since 2001. This has attributed to a growing importance of foreign exchange as an asset class and an increase in fund management assets, particularly of hedge funds and pension funds. The diverse selection of execution venues such as internet trading platforms has also made it easier for individual retail traders to trade in the foreign exchange market.

Unlike the market for equities, where all participants have access to the same prices, the forex market is segmented into different levels of price access. At the very top is the inter-bank market, which is made up of the largest investment banks. Within this market, spreads, which are the differences between the bid and ask prices, are extremely small and usually non-existent. As we descend the levels of access, the difference between the bid and ask prices widens. This is due to volume. If a trader or participant can guarantee a large trading volume, they can demand a smaller or better spread. The top-tier inter-bank market accounts for 53% of all transactions. Below that there are usually smaller investment banks, followed by large multi-national corporations, large hedge funds, and even some of the retail forex market makers.

Central banks also regularly participate in the forex market to align currencies to their economic needs.

National central banks try to control their inflation, money supply, and/or interest rates and often have target rates for their currencies. They use their abundant foreign exchange reserves to stabilize the market. The common stabilization strategy employed by central banks would be to buy when the exchange rate is too low, and to sell when the rate is too high. Nevertheless, the effectiveness of central bank strategy is doubtful as there is no conclusive evidence that they do make a profit by speculating in the forex markets. Expectations or rumours of central bank intervention might be enough to stabilise a currency. However, central banks do not always achieve their objectives as the combined resources of the market can easily overwhelm any central bank intervention.

The interbank market contributes to the majority of speculative trading volume every day.. Whilst some of this trading is undertaken on behalf of customers, the bulk is conducted by proprietary desks, trading for the bank's own account.

Until recently, foreign exchange brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for small fees. At present, much of this business has moved on to more efficient electronic systems.

A section of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Multinational companies trade smaller amounts compared to banks, and usually have minimal short term impact on market rates. Nevertheless, trade flows are significant in determining the long-term direction of a currency's exchange rate. Some companies can have an unpredictable impact when very large positions are traded due to underlying exposures that might be unknown by other market participants.

Investment management firms typically manage large accounts on behalf of customers such as pension funds and endowments. These firms use the foreign exchange market to facilitate transactions in foreign securities. Investment managers with international equity portfolios need to buy and sell foreign currencies to pay for purchases of foreign equities. As the forex transactions are secondary to the underlying investment decision, they are not seen as speculative or aimed at profit-maximization.

Some investment management firms also have specialised speculative currency operations, which manage clients' currency exposures and simultaneously generate profits as well as mitigate risk. Although the number of this type of specialist firms is quite small, many have a large value of assets under management (AUM), and hence can generate large trades.

Hedge funds have gained a reputation for aggressive currency speculation. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favor.

Retail forex brokers or market makers constitute a small section overall foreign exchange market. Estimated retail volume is at $60–120 billion daily, which is about 2% of the whole market.

There is no single central foreign exchange market. There are a number of interconnected marketplaces, where different currency instruments are traded. This implies that there are different currency rates, depending on what bank or market maker is trading.

Fluctuations in exchange rates are often caused by actual monetary flows as well as expectations of changes in monetary flows caused by changes in interest rates, GDP, inflation, budget and trade deficits or surpluses and other macroeconomic conditions. Major economic news is released publicly, giving many people the same news access simultaneously.

Main trading centers include London, New York, Tokyo, and Singapore, but banks throughout the world participate. Currency trading happens perpectually throughout weekdays, excluding weekends. When the Asian trading session ends, the European session begins, followed by the US session and then back to the Asian session.

Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted AAA/BBB, where BBB is the international three-letter code of the currency into which the price of one unit of AAA is expressed. For instance, GBP/USD is the price of the Sterling Pound expressed in US dollars, as in 1 GBP = 2.019 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.

The factors affecting AAA will affect both AAA/BBB and BBB/CCC. This causes positive currency correlation between AAA/BBB and AAA/CCC.

On the spot market, the most heavily traded products were:
EUR/USD: 28 %
USD/JPY: 18 %
GBP/USD (also called sterling or cable): 14 %
and the US currency was involved in 88.7% of transactions, followed by the euro (37.2%), the yen (20.3%), and the sterling (16.9%).

Although trading in the euro has grown significantly since the currency's creation in January 1999, the foreign exchange market is thus far still mainly dollar-centered. For instance, trading the euro versus a non-European currency CCC will usually involve two trades: EUR/USD and USD/CCC. The only exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market.