Forex Market

Open 24 hours a day and with average daily turnover of $4 trillion the forex market is the largest traded and most liquid market in the world. At the heart of it forex is about speculating on the exchange rate of one currency against another for example the Euro vs. the US dollar. Most of the trading activity takes place on the major currency trading pairs which pit the US dollar against currencies of countries such as the UK, Switzerland, Japan and of course countries within the Eurozone that have adopted the Euro as their currency.

There are several layers of participants in the forex market and at the top is the inter-bank market which is made up of the largest commercial banks, this type of participant accounts for an estimated 53% of trading. Next are smaller banks, hedge funds, pension funds, retail FX market makers together with large corporations. It is estimated that 70-90% of the trading transacted in foreign exchange is speculative in nature which means that the person or institution trading has no intention of taking delivery of the currency but rather seeks to profit from price movements.