Forex – The foreign exchange market or spot fx or retail forex or currency market is a non-stop financial market where currencies of different nations are traded.
Some of the participants in this market include government, central banks, commercial and investment banks, hedge funds and massive multinational corporations. Some of the volume in the forex market is simply banks and corporations exchanging a foreign currency for another. However, traders who attempt to take advantage of small fluctuations in exchange rates can also participate in the Forex market.
Forex stands out from other markets for a number of reasons:
* 24-hour trading, 5 days a week.
* The ability to profit in rising or falling markets.
* The biggest financial market in the world.
* Leveraged trading with low margin requirements.
* Unlike stocks the market cannot be cornered.
Every day close to $5 Trillion is traded through the Forex market. Even if you take all the daily volume traded on the U.S. stock, bond and equity markets and add it together it does not come close to matching the enormity of the Forex market.
Back in 2007, the reported daily average turnover of the Forex market was reported to be over US$3.2 trillion by the Bank for International Settlements. Between 2007 and 2008, it was reported that the market grew an additional 41%, taking it to a massive US$4.5 trillion daily.
The average daily turnover for 2007 was:
$1.005 trillion in spot transactions
$362 billion in outright forwards
$1.714 trillion in foreign exchange swaps.
Forex Located:
You probably already know that the physical location of the U.S. stock market is New York, and the Futures market is Chicago.
However, in Forex there is no central location. Forex is not dealt across the floor like the stock market on Wall Street, it is traded via the internet. Trading is conducted between traders 24 hours per day through electronic communication networks (ECNs), in various markets around the world. Since the Forex market is traded through ECNs, it does not need a physical location.
You may sometimes hear London referred to as the global centre of the foreign exchange market. This is because trading in London accounts for close to 35% of all trading. This is more than double the 17% New York trading accounts for.
So, even though Forex has no physical location the global centre of Forex is definitely London.
