The foreign exchange market has received a lot of attention over the past ten years as more and more people have entered the currency trading market. Once the domain of multinational banks and institutional investors, currency trading is now accessible to anyone with an internet connection. But there’s a lot more to currency trading than meets the eye. The following list provides ten fascinating facts about currency trading that you probably didn’t know.
- The foreign exchange is the biggest financial market in the world
In terms of daily turnover, stocks, bonds and commodities have nothing on the foreign exchange, which is by far the largest and most liquid financial market in the world. Global daily turnover in the foreign exchange market is a staggering $5.3 trillion per day.[1] Let that figure sink in for a moment. That’s $5.3 trillion!
- Currency exchange is an ancient practice
Contrary to what you might believe, currency trading is not a new phenomenon. The first evidence of currency exchange on record can be traced to Biblical times where a group of “money-changing people” used to help others change money in exchange for a commission or service fee.[2] That sounds a lot like today’s foreign exchange market.
- The big banks still dominate the foreign exchange
Although retail forex trading is growing exponentially, the global foreign exchange market is still dominated by multinational banks, which together account for about 70% of daily forex trading. Deutsche Bank, Citi, Barclays, UBS and HSBC combined account for more than half of global market share.[3]
- The modern foreign exchange market has its roots in the 1850s
The modern foreign exchange market can be traced back to around 1850, where US firm Alexander Brown & Sons pioneered the business of currency trading. Around 30 years later the gold standard would be introduced, which is considered by many to be the beginning of the modern forex market.[4]
- The majors make up the vast majority of all forex trades
The majors – EURUSD, USDJPY, GBPUSD and USDCHF – represent around 90% of all trades in the forex market.[5] As a result, these pairs have tremendous liquidity, offering plenty of trading opportunities.
- The US dollar is king
You probably noticed that the four majors have one thing in common: they all involve the buying or selling of the US dollar. That’s no coincidence, as the greenback is on one side of 87% of all forex trades.[6]
- Four financial centres drive the global forex market
The global currency exchange market has four major arteries – London, New York, Singapore and Tokyo. Together, these cities intermediated 71% of all currency trades as of April 2013, up from 66% just three years prior.[7]
- Currency trading collapsed in 1972-1973
While it may be difficult to believe today, global currency trading was forced to shut down in the early-1970s after both the Smithsonian Institution Agreement and the European Joint Float failed to address domestic problems of individual member-states. Both of these agreements were reached after US President Richard Nixon famously ended the Bretton Woods Accord, which also included a fixed rate exchange.[8]
- 4 million people are estimated to be involved in retail currency trading
Globally, there are 4 million traders involved in retail forex trading, a figure that would have been highly improbably before the advent of online forex platforms .A combined 3 million traders are based in Europe and Asia.[9]
- MetaTrader4 is the platform of choice
While there are plenty of platforms to choose from, MetaTrader4 or MT4 has become the industry standard.[10] In fact, it’s highly unlikely to ever come across a reputable forex broker that doesn’t offer an MT4 trading platform. Clearly, traders have made their choice.
Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose.Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).
[1] Bank for International Settlements (September 2013). Foreign exchange turnover in April 2013: preliminary global results. Triennial Central Bank Survey.
[2] Daniel Lindsay. “50 Fascinating Facts About Forex.” Mahi FX.
[3] Alfrick (June 13, 2013). “10 Facts You Must Know On Online Forex Trading. “Forex Trading Blog.
[4] Alfrick (June 13, 2013). “10 Facts You Must Know On Online Forex Trading. “Forex Trading Blog.
[5] Studyforex.com. Major Currencies in the Forex Market.
[6] Bank for International Settlements (September 2013). Foreign exchange turnover in April 2013: preliminary global results. Triennial Central Bank Survey.
[7] Bank for International Settlements (September 2013). Foreign exchange turnover in April 2013: preliminary global results. Triennial Central Bank Survey.
[8] FX Trademaker. History of Foreign Exchange Market.
[9] Bapi Maitra (January 2014). “State of the Retail Foreign Exchange Market.” CitiFX.
[10] Bapi Maitra (January 2014). “State of the Retail Foreign Exchange Market.” CitiFX.
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