HALAMAN SELANJUTNYA:
Forex Secrets - The 'What' and 'How' of the Lucrative $3.5 Trillion Forex Trading MarketIt's an open secret! Foreign exchange market or forex or simply the FX market is the Big Daddy of all markets! And it is here that people make or lose money, big money that too! Well, what else do you expect when you get to play in the world's most traded financial market where huge volumes of cross-border business transactions pass through the forex market at some stage of the deal?
Consider this: Every day the average currency trading volume at the forex market exceeds $4.5 trillion which is 10 to 15 times more than the everyday average trading volume done on all the stock markets in the world put together! There is a reason for this. The forex market is purely a trader's market that works all through the day and night and on 6 days a week thus comfortably positioned to immediately react, positively or negatively to the news and events around the globe as and when they unfold. For example, following the Eurozone debt crisis in Greek and other European economies the Euro, in the month of May 2010, plunged to new lows against the Japanese and almost beat the four-year low against the U.S Dollar! And at the same time the world saw a huge surge in demand for the U.S 10-year Treasuries.
Major currencies bloc
In the forex market, three-fourths of the currency trading volume is done in the ostensible "major currencies," bloc, which obviously is used in the largest and most developed economies in the world (the US Dollar, Japanese Yen, EURO, the Australian Dollar, the British Pound, the Canadian Dollar and Swiss Franc). Then there is trading done in the regional currency bloc in US Dollar, Japanese Yen and the Euro which are the three largest economic super powers in the world.
Speculation drives the currency market
It is true that cross-border currency transactions can bring in huge volumes of money into the forex market but it is still only a small percentage or as estimates put it just 10% of the total currency trading volumes. The money dwarfs in comparison to the remaining 90% of the currency trade volumes traded by way of speculation by the forex traders who buy and sell currencies for short-term gains driven by the price fluctuations that happen every minute and every hour in a trading day. Such huge contributions from the speculative market have ensured that the forex market, in terms of liquidity is far ahead over other financial markets in the world.
Liquidity determines market interest
Most global financial markets go through one or more dull phases in a given trading day. This is primarily due to the low liquidity prevalent in such markets, which is the key force that determines the market interest. In a trading scenario, liquidity is an important tool that determines the pace of the movement of prices between trades and over time. In other words, market interest or the level at which a particular asset or security is bought and sold at any point in a trading day is directly linked to the liquidity of the financial market.
The forex market for instance has a higher liquidity and presents an ideal platform for the quick buying and selling of an asset or security with no fixed hours of trading. Also in other financial markets even small volumes of trade could affect the movement of prices but in the forex market even a trade worth billions of dollars done in seconds can still keep the price movements at the same levels!