The retail "Forex" market is an off-exchange retail foreign currency market where the participants are able to buy, sell, exchange and speculate on currencies. Essentially, the process to exchanging one currency for another is a simple trade that is based on the current rates of the two currencies involved. The currency market is comprised of central banks, investment and commercial banks, fund management firms (mutual funds and hedge funds), major corporations, and individual investors or speculators. The forex market, in conjunction with the interbank market, is one of the largest financial markets in the world with the retail sector contributing a small portion of the overall forex market volume.
Private investors or individuals are often referred to as Retail Forex Traders. Retail Forex traders, or speculators, commonly access the off-exchange retail foreign currency market (or Forex market) via a Forex broker. They do not trade in the actual Interbank market itself. Typically this includes specific Forex trading software developed for the Retail Forex Market - such as Meta Trader 4 (a MetaQuotes product) or trading platforms that have been developed in-house for use on the internet.
The brokers act as a bridge between you and their liquidity partner or partners (sometimes larger global banks) that you would otherwise not have sufficient capital to do business with. This can happen in one of several ways. Whilst some Forex Brokers act as market makers, meaning that they create the liquidity and assume some risk, other retail brokers clear trades directly through to the larger banks that provide their liquidity. The latter is referred to as straight through processing.
Unlike other financial markets, the Forex market operates 24 hours a day, 5 days a week. Starting in Sydney, then Tokyo followed by Europe and finally the Americas, the market opens late on Sunday evening and then closes late on Friday. It is conducted through an electronic network of banks, corporations and individual traders exchanging currencies. For retail traders Forex is primarily used as a means for speculative investing and actual physical delivery of currencies is almost never intended.