Forex Market Size And Liquidity
Lesson:
What is Forex?
Okay, let’s get into what forex is all about.
So forex is like a large worldwide money market where you may exchange different currencies. Consider this: you’re betting on one currency being stronger than another, and if you’re correct, you earn some money.
Now, back in the day (before the epidemic), when people could hop on aeroplanes and tour the world, you might recall visiting another nation and having to change your money. You’d wait at the airport, look at the screen with all these rates, and think, “Wait, is my dollar worth 100 yen? Awesome!”
Guess what? That’s you, right there, participating in the currency market! You are exchanging one currency for another. If you are an American visiting Japan, it is equivalent to exchanging dollars for yen.
Before you go home, you stop by the currency exchange to convert any leftover yen to dollars. But here’s the kicker: the rates have changed. These modifications can help you generate money in the currency market. Cool, right?
What is forex?
Okay, let’s break down the whole Forex business.
Forex, or FX, is essentially the world’s largest money party. It’s where different countries exchange currency, and it’s so big that it overpowers the New York Stock Exchange.
Most of the time, these currency trades are not operated by foreign trade or holidays. No, most people buy and sell money for profit. These currency traders, often known as Competent, buy currencies in the hopes that they will increase in value later.
Consider this: the New York Stock Exchange processes over $200 billion per day. Doesn’t that sound like a lot? But what about the Forex market? Hold on to your hats—it’s a mind-blowing $7.5 trillion every day. Yes, that is a trillion with a “T.”
Consider the New York Stock Exchange (NYSE) to be a large, noisy monster. Consider the FX market to be a super-mechaGodzilla way bigger than the NYSE.
Here’s monetary talk: the total forex market is $7.5 trillion, but the component we generally trade (the “spot” market) is around $2 trillion per day. So it’s like comparing a small ant to a massive elephant in terms of size.
But there’s a little secret: they want to build it up as this huge thing, but when you break it down, the retail segment (that’s us normal traders) accounts for only about 3-5% of the total forex market. So it’s large, but not as big as they make you believe.
And here’s the cool part: the currency market never sleeps! It is open every day of the week and only closes on weekends. Unlike the stock and bond markets, which close at the end of the business day, the forex market is like a global traveller, moving from one city to another all over the world, much like a money adventurer.
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What is Forex?
Lesson: 1
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Lesson: 2
Currency Pair Buying and Selling
Lesson: 3