Foreign Exchange

The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex and related markets currently is over US$ 3 trillion
The foreign exchange market is unique because of
· its trading volumes,
· 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 (from 5pm EST on Sunday until 4pm EST Friday),
· the variety of factors that affect exchange rates.
· the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
· the use of leverage


Foreign exchange market turnover, 1988 - 2007, measured in billions of USD.
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the BIS,[1] average daily turnover in traditional foreign exchange markets is estimated at $3.21 trillion. Daily averages in April for different years, in billions of US dollars, are presented on the chart below:
This $3.21 trillion in global foreign exchange market "traditional" turnover was broken down as follows:
· $1,005 billion in spot transactions
· $362 billion in outright forwards
· $1,714 billion in forex swaps
· $129 billion estimated gaps in reporting
In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.