Welcome to the World of Foreign Exchange
The Forex Market is also referred to as the Foreign Exchange Market or sometimes just FX. It is available to trade 24 hours a day for 5 days per week and is the largest financial market in the world. If you have ever been on holiday and exchanged your currency then you have unintentionally already participated in it. Currencies are valued and traded against each other, commodities are valued and traded against currencies.
At the institutional level, those who take part in this massive market are: Governments, Central Banks, Commercial and Investment Banks, Hedge Funds and Large Multinational Corporations. The rest of us only really have access to the Forex Market at the retail level. Everyday life on the planet moves this market and it is not only the actual traders that are responsible. Large banks and companies have to deal with currency every day as part of their business, so there are a lot of transactions made daily regardless. Forex traders will try to read the market and make profits in small or large fluctuations of the exchange rates, the size of the fluctuation they are looking for depends on their trading style.
What Makes Forex Stand Out?
The sheer size of the Forex Market is unrivaled and currently stands at a whopping $6.6 Trillion per day in trading volume (2019 numbers). In order to put that into perspective, you only need to compare it to the New York Stock Exchange which is currently trading at around $22 Billion per day. We are talking around 240 NYSE’s all being traded at once to compete with the Forex Market. The difference is HUGE! Let’s not forget also that the Forex Market continues to grow. To throw in a little trivia for you; back in 2007 the Forex Market was reported to be trading at $3.3 trillion per day, back in 2013 the Forex Market was reported to be trading at $5.3 trillion.
Global numbers aside, it is worth noting that as a retail trader you will only be part of a $1.5 trillion market, so the equivalent of only 68 NYSE’s if we stay with the comparison made above. STILL a massive market, so we’ll live. Beyond the magnitude of the Forex Market, the fact that it remains open 24 hours a day for 5 days a week is also unrivaled. You can profit in both rising and falling markets plus you get the benefits of high leveraged trading with low margin requirements, just be careful with high leverage and make sure you understand how to use it safely. The last thing worth mentioning is that where the Stock Market can be cornered it would be very hard for the same to happen with the Forex Market.
Forex Trading is Global
As you will have understood already Forex is traded non-stop around the globe but the most Forex Trading still goes through London. Here is a look at the Forex Trading Distribution percentages from the end of 2013, having checked in 2016 and 2018 it hasn’t changed much: