Foreign exchange is the trading of one currency for another. The physically non-existent foreign exchange market provides a platform for the trading of currencies. The traders speculate on the variations in the exchange rates while trading with the different currencies. The market is open round the clock and the traders have the facility to trade when he choose to do so, based on the currency fluctuations. Earlier, the foreign exchange market was open only to the wealthier section or large organizations. Now individual traders can freely trade in the market which is driven by speculation. Currency prices rise and fall based on their demand and supply which in turn is influenced by political factors, economic factors and above all, psychological factors.