The Forex Market

Understanding the size and scope of the froex market can help make trading int he market less confusing and far less overwhelming. The market is very large and the liquidity of the market is different from that of stock markets, and other financial markets, the volume of trades is greater, the time of day you can trade is different, etc.. Taking time to understand the market will aid you in becoming a successful investor in it.

A few facts worth knowing about the forex market:
- The forex market is the most traded financial market in the world. I
- The forex market is the cross roads where all international capital and global commerce and investments flow. If there is any transaction that crosses a border, at some point it is going to go through the forex market.
- The forex market has a trading volume that exceeds 2 trillion dollars a day, which is 10-15 times greater than the trading volume of all the stock markets in the world combined.

Global financial and investment trades are the primary non-speculative source of forex market volume. So when a pension fund in Great Britain buys US Treasury bonds, this is part of the forex non-speculative trade volume. However, most of the trading is speculative, in fact, upwards of 90% is.

The forex market has unmatched liquidity in the global financial markets due to the depth and breadth of the speculative market. It is faster and easier to make trades in the forex market, and large volume trades can be transacted without a big price move, as the liquidity is so high.

The majority of speculative trading takes place in the major currencies, and in the blocs that represent the most developed economies. This is between the USD bloc, the JPY bloc, and the EUR bloc.

There are three main sessions where trading takes place: The Asia-Pacific session, the European/London session, and the North American session. However, the forex market is open around the clock 24/6. This makes it a trader's market, as it is even open on holidays thanks to the fact that not all countries celebrate the same holidays.

An important aspect of trading to remember in the forex market is that while it overlaps other financial markets, it is important to look at them and trade them individually. Most of the markets may influence each other slightly, but direct correlations are hard to find, and only one of several factors thus assumptions about what is going to happen in currencies based on what is happening in oil, will likely prove incorrect. As oil prices may impact currency, but in such a small way that it will never significantly be able to account for a market change.

As you can see, the forex market is vast, trillions of dollars go through this market each day, and it operates independently of other global financial markets. Once you have properly grasped the size and scope of this market, you can move on to understanding the mechanics of trading within it.