Foreign exchange trading refers to converting money in to other currencies on the basis that you expect that currency to strengthen against your original currency.
You can actively trade currencies using various forex brokers e.g. http://www.xe.com
Most forex traders generally trade in the mainstream floating exchange rate currencies e.g. Yen/Euro, Euro/USD, USD/Sterling etc. As these currencies are relatively stable, a lot of FX transactions are heavily leveraged to amplify the small changes.
The FX market is highly liquid with trillions of dollars being moved around the world on a daily basis. Due to the liquidity, there is no requirement for central market makers in FX, so trades are directly between 2 parties. The biggest players in the market are the investment banks with intra-bank bid-ask spreads on currency exchange rates having a razor sharp margin. Unfortunately, these rates are not available to retail investors. Most retail investors will exchange real money at foreign currency exchanges such as travelex. The bid-ask spreads on these exchanges are often very high.
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