Foreign Exchange

 Foreign Exchange Market

From Wikipedia The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest market in the world, in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. Retail traders (small speculators) are a small part of this market. They may only participate indirectly through brokers or banks and may be targets of forex scams.

Contents

    Market size and liquidity

    Trading characteristics

    Market participants

        Banks

        Commercial Companies

        Central Banks

        Investment Management Firms

        Hedge Funds

        Retail Forex Brokers

    Speculation

Market size and liquidity

The foreign exchange market is unique because of:

        its trading volume,

        the extreme liquidity of the market,

        the large number of, and variety of, traders in the market,

        its geographical dispersion,

        its long trading hours - 24 hours a day (except on weekends).

        the variety of factors that affect exchange rates,

Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study Triennial Central Bank Survey 2004

    $600 billion spot

    $1,300 billion in derivatives, ie

        $200 billion in outright forwards

        $1,000 billion in forex swaps

        $100 billion in FX options.