Forex trading, also known as foreign exchange trading, is the buying and selling of currencies in the global market. The forex market is one of the largest financial markets in the world, with an average daily turnover of $5.3 trillion. Forex trading has become increasingly popular over the years, and many investors are now engaging in it to make profits. One of the strategies used by forex traders is short selling. Short selling involves selling an asset in the hope of buying it back at a lower price to make a profit. In this article, we will look at the percentage of forex trades that are short.
To understand the percentage of forex trades that are short, we need to first understand the concept of long and short positions. A long position is when a trader buys a currency with the expectation that its value will increase in the future. A short position is when a trader sells a currency with the expectation that its value will decrease in the future.
According to a survey conducted by the Bank for International Settlements (BIS) in 2019, the percentage of forex trades that were short was 44%. This means that 44% of all forex trades involved traders selling a currency with the expectation that its value would decrease in the future.
The BIS survey also revealed that the majority of forex trading was done by institutional investors, such as banks and hedge funds. These investors accounted for 79% of all forex trading volume. Individual traders accounted for the remaining 21%.
Institutional investors tend to engage in short selling more than individual traders. This is because they have access to more resources and information that enable them to make informed decisions. They also have larger trading volumes, which means they can take advantage of small price movements to make profits.
Short selling can be a risky strategy, as it involves predicting the future movements of currency prices. If the price of the currency being sold does not decrease as expected, the trader could incur losses. However, short selling can also be a profitable strategy if the trader’s predictions are correct.
Short selling can also be used as a hedging strategy. Hedging involves taking a position that offsets the risk of another position. For example, if a trader has a long position in one currency, they can take a short position in another currency to offset the risk. This can help to reduce the trader’s overall risk and protect their investment.
In conclusion, the percentage of forex trades that are short is 44%. This means that 44% of all forex trades involve traders selling a currency with the expectation that its value will decrease in the future. Institutional investors account for the majority of forex trading volume, and they tend to engage in short selling more than individual traders. Short selling can be a risky strategy, but it can also be a profitable one if the trader’s predictions are correct. It can also be used as a hedging strategy to reduce overall risk.