About Forex

The growth of the average daily volume of Forex trading has been phenomenal and is now currently trading currency to the tune of $1.6 trillion a day, having grown 50% in the last decade from an already large $1.0 trillion a day in 1992. It reached a high level in 2001 with approximately $2.2 trillion but adjusted back to the current $1.6 trillion by 2003. This was likely due to the birth of the single Euro currency in place of the then existing 12 European currencies.

The largest part of the largest financial market in the world consists overwhelmingly of speculation, in the form of spot forex trades (95%). The remaining 5% consists of companies swapping currencies back to their home currency to repatriate profits, forwards moves, and all other transactions.

The Traded Currencies
The six major currencies of Forex dominate the overall market share. 76% of all trades have both currencies in the currency pair as a major, and more than 98% of all trades involve at least one major.
Both of these figures are well beyond what would be expected if foreign currency trading were based solely on the majors' share of world GDP (74.5%), demonstrating the value the majors command abroad relative to other currencies. Another way thinking about the majors' predominance in the currency markets is to compare the rest of the world's economic output (25.5%), to the less than 2% share of Forex speculation that does not have a major on either side of the currency pair.
The most common currency pairs are EUR/USD (30%), USD/JPY (20%), GBP/USD (11%), and USD/CHF (5%), which together totals 66% (two-thirds) of all Forex spot trades.

The Dollar, Euro, Yen, and Pound are the most traded currencies. The six majors combine for a huge bulk of the trading transactions in a single day. Corporations and banks have known this for years, and have often used Forex for hedging purposes. With the increase in global trade, multinational corporations have likewise used the forex market to manage their risk in changes in currency rates.
Source: SGFS; Bank of International Settlements, Triennial Central Bank Survey.
Why Trade Forex?
The transformation of the world economy into a global dimension and the dawn of technological advancement create unprecedented opportunities particularly with the emergence of new markets with considerable growth potential. This scenario likewise underscores the fact that up-to-date information in this modern age is a valuable commodity made possible by breakthroughs in information technology. Now world events are digested in a matter of seconds providing the backbone for vital investment decision making. Among the most dynamic of the markets which is highly sensitive to political and economic changes is the Foreign Exchange Market (FOREX).
Whether we like it or not, radical changes in forex exchange rates affect an individual's or institution's overall investment portfolio. If your holdings are all in US Dollars, you have chosen to hold the dollar and give up other major currencies. Indirectly, this makes you a currency investor. By investing in, and with, the US currency, then your portfolio becomes dependent on the integrity and value of the US Dollar. Without realizing it, this may have worked against you due to the decline of the value of the US Dollar against other major currencies.
The FOREX market provides the investor a valuable tool in managing the effects of the foreign exchange risk by taking advantage of fluctuations in exchange rates. It is a means by which one can readily access this global market 24 hours a day and be able to hedge his/her outstanding US Dollar-based holdings. In a time when the speed of business increases on a daily basis, you need the ability to react swiftly. This change has created a condition that may leave investors out of the game without being aware of lost opportunities or erosion in their capital assets.
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