The foreign exchange market, also known as forex or FX, is the largest financial market in the world. It is a decentralized market where currencies are traded electronically over-the-counter (OTC) by banks, financial institutions, and individual traders. According to a survey conducted by the Bank for International Settlements (BIS) in 2019, the average daily turnover in the global forex market was $6.6 trillion.
To understand how much money circulates in forex, it is important to first understand how the market works. In forex trading, currencies are always traded in pairs, such as EUR/USD, USD/JPY, GBP/USD, etc. The value of a currency pair is determined by the exchange rate between the two currencies. For example, if the exchange rate of EUR/USD is 1.10, it means that 1 euro can be exchanged for 1.10 US dollars.
Forex trading is done through a network of banks and financial institutions that act as market makers, providing liquidity to the market. These institutions buy and sell currencies on behalf of their clients, making a profit from the difference between the buying and selling price of a currency pair, known as the spread. Individual traders can also participate in forex trading through online platforms provided by brokers.
The forex market is open 24 hours a day, five days a week, allowing traders to trade currencies at any time. The market is divided into three main trading sessions: the Asian session, the European session, and the US session. The Asian session starts at 9 pm GMT on Sunday and ends at 8 am GMT on Monday. The European session starts at 7 am GMT and ends at 4 pm GMT, while the US session starts at 12 pm GMT and ends at 9 pm GMT.
The size of the forex market can be measured in terms of its daily turnover, which is the total value of all currencies traded on a given day. According to the BIS survey, the daily turnover in the global forex market was $6.6 trillion in April 2019. This is an increase of 29% from the previous survey conducted in 2016, which reported a daily turnover of $5.1 trillion.
The majority of forex trading is done in the spot market, where currencies are traded for immediate delivery. According to the BIS survey, the daily turnover in the spot market was $2 trillion in April 2019. The remaining $4.6 trillion was traded in the derivatives market, which includes options, forwards, and swaps.
The most actively traded currency pairs in the forex market are the major currency pairs, which include the US dollar, euro, Japanese yen, British pound, Swiss franc, Canadian dollar, Australian dollar, and New Zealand dollar. These currency pairs account for around 85% of the total daily turnover in the forex market.
The forex market is influenced by a variety of factors, including economic data releases, political events, central bank policies, and market sentiment. Traders use a variety of tools and techniques to analyze these factors and make trading decisions. These include technical analysis, fundamental analysis, and sentiment analysis.
In conclusion, the forex market is the largest financial market in the world, with an average daily turnover of $6.6 trillion. The market is open 24 hours a day, five days a week, and is traded by banks, financial institutions, and individual traders. The most actively traded currency pairs are the major currency pairs, which account for around 85% of the total daily turnover. The forex market is influenced by a variety of factors, and traders use a variety of tools and techniques to analyze these factors and make trading decisions.
