Forex, short for foreign exchange, is the largest financial market in the world. It is where currencies are traded around the clock, with participants ranging from large financial institutions to individual traders. The forex market is an over-the-counter (OTC) market, meaning that trades are conducted directly between buyers and sellers without the need for a centralized exchange. As a result, the forex market is highly liquid and trades can be executed quickly and efficiently. But just how much money circulates through forex daily?
According to the Bank for International Settlements (BIS), the average daily turnover in forex markets was $6.6 trillion in April 2019. This represents a 29% increase from the previous BIS survey in April 2016, which reported a daily turnover of $5.1 trillion. The significant increase in turnover can be attributed to a number of factors, including increased participation from retail traders, technological advancements, and the growing importance of emerging market currencies.
The majority of forex trading is conducted in the major currency pairs, which include the US dollar, euro, Japanese yen, British pound, Swiss franc, Canadian dollar, and Australian dollar. These currencies account for approximately 90% of daily trading volume in the forex market. The US dollar is the most actively traded currency, involved in approximately 88% of all forex transactions.
In addition to the major currency pairs, there are also a number of minor currency pairs and exotic currency pairs that are traded in the forex market. Minor currency pairs include currencies from smaller economies, such as the New Zealand dollar and the Singapore dollar. Exotic currency pairs include currencies from emerging market economies, such as the Mexican peso and the Turkish lira.
The forex market is open 24 hours a day, five days a week. This allows traders from around the world to participate in the market at any time, regardless of their time zone. The busiest trading sessions are during the overlap between the European and US trading sessions, which occurs between 8:00am and 12:00pm EST.
The forex market is highly leveraged, meaning that traders can control large positions with relatively small amounts of capital. This allows traders to potentially earn large profits, but also exposes them to significant risks. As a result, it is important for traders to have a solid understanding of risk management and to use appropriate position sizing techniques.
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 highly liquid and trades can be executed quickly and efficiently. The majority of trading is conducted in the major currency pairs, with the US dollar being the most actively traded currency. The forex market is open 24 hours a day, five days a week, allowing traders from around the world to participate at any time. While forex trading can offer the potential for large profits, it is important to manage risk appropriately and use proper position sizing techniques.
