Learn to Trade

The Forex Market 

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How Big is the Forex Market?

According to the Bank for International Settlements triennial report of 2016, the foreign exchange market cap averaged $5.1 trillion per day. With this size and depth, it makes it an ideal trading market. The liquidity of Forex makes it easy for traders to sell and buy currencies without delay. Liquidity id important as it allows traders to get in and out of a position at ease 24 hours a day, five and a half days a week. This also allows large trading volumes to enter and exit the market without large fluctuations in price. From a trader’s perspective, if the forex market capitalization is large, this can lead to less volatility as large trades do not have as significant impact on the price of the market. Smaller markets on the other hand can be influenced by large institutions/traders with relative ease but with forex, this impact is comparatively diluted. 

The forex market is composed of several key constituents. The banks are the most influential one. The interbank market encompasses the largest volume of foreign exchange trading within currency space. As retail traders, it is good to know the enormity of the forex market and how these different components interact with each other on a larger scale to become successful in your trading strategy. 

  

At a foundational level, traders need to understand the following pillars to forex trading: 

  • Money Management: Traders should know how to measure their potential risks and rewards. With this knowledge, they can judge entries, exits and trade size. Once they find a balance between these central systems, they will turn their attention to honing their skills. 
  • Fundamental Analysis: You can look at supply and demand. Interest rates, economic growth, employment, inflation, and political risk are all factors that can affect supply and demand for currencies. 
  • Technical Analysis: most forex traders depend on price charts in making their trading decisions. Charts can point out trends and important price points where traders can enter or exit the market. 

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Risk Disclaimer:  

Learn to Trade Pty Ltd (ACN:138178542, AFSL:339557) provides general information and educational courses and materials only. This is not an offer to buy/sell financial products. We do not provide personal advice nor do we consider the needs, objectives or circumstances of any individual.  Financial products are complex and all entail risk of loss. Over-the-counter derivative and foreign exchange products are considered speculative because they are highly leveraged and carry risk of loss beyond your initial investment, hence should only be traded with capital you can afford to lose. Please ensure you obtain professional advice to ensure trading or investing in any financial products is suitable for your circumstances, and ensure you obtain, read and understand any applicable offer document 

 

The information contained herein (“Content”) has been prepared and issued by Learn to Trade Pty Ltd (LTT), and all intellectual property relating to the Content vests with LTT unless otherwise noted. The Content is provided on an as is basis, without warranty (express or implied). Whilst the Content has been prepared with all reasonable care from sources we believe to be reliable, no responsibility or liability shall be accepted by LTT for any errors or omissions or misstatements howsoever caused. No guarantees or warranties regarding accuracy, completeness or fitness for purpose are provided by LTT, and under no circumstances will any of LTT, its officers, representatives, associates or agents be liable for any loss or damage, whether direct, incidental or consequential, caused by reliance on or use of the Content. 

 

 

 

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