FOREX CURRENCY TRADING

The Foreign exchange or Forex market is the largest financial market in the world. It dwarfs the size of other markets such as the commodities market or the stock market. The average daily currency trading volume is over $2 trillion dollars a day. That’s almost fifteen times larger than the daily trading volume of all the stock markets in the world. The forex market is where global capital and international trade intersects. It is an exciting market that operates around the clock. Forex currency trading a fantastic market for small traders to partake in. This piece will explain a little more about what forex currency trading is and how the forex market operates.

The reason that the Forex market is so large is because for any international financial or commercial transaction to occur a cross border currency transaction must take place. Take for example a German hedge fund that is investing in an American car manufacturer. First they must exchange Euros for dollars. Then those funds may be reinvested by an American pension fund in Australian bonds. Again another exchange of currency takes place. Of course not all of the forex markets are trades such as these. The majority of forex currency trading is purely speculative in nature.

Forex currency trading is probably the most pure trading market in the world. It’s a market which operates around the clock six days a week. It means that as a trader you can react to the news as it happens. Often the most important news will happen outside of the stock markets trading hours. Unfavourable news can occur and you have no way of trading out of your position. With currency trading it is almost always possible to trade in and out of positions according to changing market conditions.

As mentioned earlier the majority of forex currency trading is speculative in nature. The exact amount is not known but estimates put the figure at over ninety percent of daily trading volume. This is actually great news for the small time trader as it means that the market is incredibly liquid. In fact no other market in the world is as liquid as the currency markets. Most of the trading that occurs in the currency market is in the major currencies such as the Yen, the dollar and the Euro. These comprise around three quarters of the currency market.

Currency really can be traded around the clock. The trading week starts off on Monday morning in Wellington New Zealand which is the first market to open. From there the market is open twenty four hours a day until it closes at the end of business on Friday in New York. Forex currency trading does not even slow down for the holidays. Because the forex market is not rooted in national boundaries it does not matter if it is a public holiday in say Hong Kong because the market may still be open in Singapore and thus can still be traded. The only day on which all Forex currency trading stops is on New Year's Day. And even that depends on what day it falls.