How Big Is The Forex Trading Market?
The Foreign Currency Exchange, or FOREX market is bigger than any market in world, and if you put all of the world’s equity and other markets in one beaker, the meniscus will only reach a quarter of what the Foreign Exchange market is worth. Needless to say, it is the largest financial market on earth with about 3.2 trillion US dollars in daily volume. If this visual is still not enough, the New York Stock Exchange only has an average daily trading volume of about $55 billion. Forex was introduced to the world in 1972 at the Chicago Mercantile Exchange and was only made available to the public in 1988. But international banks still remain as the forerunners of the foreign exchange market, with Deutsche Bank as the top player. Other players are UBS, HSBC, City Group, Coldman Sachs, J.P. Morgan Chase , ABN Amro, Merill Lynch and Morgan Lynch.
Forex trading works by trading one currency to another. It may sound very simple but it is the absolute opposite. The business revolves around and plays with the rise and fall of the value of each nation’s currency. One currency is being traded against another, in postulation that the latter increases in value. It’s a complex gamble, with risks and uncertain probabilities that may make it or break it altogether. Since risk is a major aspect of the game, an unwary private investor may find himself defenseless against this war or pure possibilities.
It takes time and strenuous training to really understand how the system works. But the Forex market almost works like other markets. In stock market, an investor purchases stocks and then just wait there for the outcome, with fidgeting knees and a cynical twitch on the lips. In Forex, two different currencies are being bought and sold all at the same time. Currencies are quoted in pairs like EUR/USD, USD/JPY or GBP/USD and the exchange rate stands as the buying price between the two currencies. In an example, USD/JPY tells the number of Japanese Yen than one US dollar can buy. So if with all your postulations and methods you sincerely think that Japanese Yen will increase in value greater than the US Dollar, then you buy Japanese Yen with US Dollar. And if it does, you sell your Yens back and celebrate.
Despite the high risk involved, there are a few things why the Forex market is more convenient and preferable than any other popular investment markets. If you are a private individual who is thinking of gambling some money in the Forex market and are considering going to a firm, most of them don’t charge for any commission. You only pay for your actual bet. The market also trades 24 hours every banking day. You are allowed to trade on leverage which can either magnify your gain or loss, or if by any chance you’ve made the wrong decision or you just ran out of luck.
Never bet anything that you cannot afford to loss, because even though how optimistic you are about it, there will always be the odds of you losing it in one sudden change in the economy since currency values and primarily controlled by unpredictable factors.
People have made huge fortunes in Forex trading, but more people have lost money than profited.