Forex Market Size

 The FX market is the most liquid and largest financial market in the world. Learn about forex market size, liquidity, and facts to trade efficiently.

Table of Contents

The foreign exchange or forex market is the most liquid and largest financial market in the world. The size, volatility, and liquidity of the market play a crucial role in trading. In this article, we will discuss the size, liquidity, features, and facts of the forex market to assist you in making effective trading decisions.

The foreign exchange market is an over-the-counter market to buy and sell currencies and take advantage of their price movements.

According to the data, over $7.5 trillion transactions take place in the forex market daily. Even at the time of writing, a large number of transactions are going on in the market.

In addition, there are more than 180 legal currencies to choose from. However, the majority of trading occurs in eight major forex currencies including United States Dollars, Euro, Japanese Yen, Australian Dollars, New Zealand Dollars, Switzerland Franc, Canadian Dollars, and Great Britain Pounds.

The Forex market has four trading sessions: Sydney, Tokyo, New York, and London. Most of the transactions occur in London and New York sessions at overlapping times.

There is no central authority or physical location that regulates the activities of foreign exchange. However, the respective central bank or government can influence trading by framing rules and restrictions.

Liquidity & Forex Market Size

Liquidity is the ability to buy or sell financial assets in a market easily and quickly or convert them into cash whenever you want.

In the financial market, liquidity is crucial and directly affects your profit and loss. The Forex market is the most liquid financial asset market.

Higher liquidity indicates high trading activities, which means both the demand and supply of the financial asset are high and vice versa.

Market liquidity will enable you to quickly enter and exit a trade, which is the reason why the forex market is more popular than stock or any other financial market.

Central banks, big commercial banks, multinational companies, financial institutions, investment firms, retail investors, and hedgers are among the top players in the forex market.

Forex Market and US Dollars

The United States has established its prominence since World War II. It is currently the largest economy globally, with top infrastructure, plentiful reserves, surplus trade balance, political stability, military power, and economic strength.

That is why USD is considered the strongest currency in the world. As per information, more than 85% of transaction occur in USD, and the United States hold 62 % of the total foreign exchange reserve.

The US Dollar also became the medium to exchange goods and services at a global level. As a result, almost every country holds a significant amount of USD.

In addition, major financial news and economic data are reported in USD. As a result, people’s confidence and trust are increasing in US Dollars.

Major currency pairs account for 67% of forex transactions. These are made up of the eight major currencies. However, it is a must to have one USD in a pair for trading in majors.

Almost half of the forex transactions occur in the United States and the United Kingdom. EUR/USD is the most traded currency pair. It offers traders a tight spread, excellent liquidity, and volatility.

Forex Market Size

Facts about Forex market size

  • The Forex market is the biggest financial market, almost double the global GDP.
  • The forex market size is around 2.09 quadrillion dollars.
  • The forex market cap per day is around $7.5 trillion.
  • The daily trade volume of the forex market is almost 50 times more than the New York Stock Exchange.
  • There are around 15 million traders in the forex market.
  • Many people prefer stock over the forex market. However, the currency market is 25 times bigger than the stock market.
  • The three most traded currencies are USD, EURO Zone’s Euro, and Japanese Yen—78% of all forex transactions account for the US, UK, Japan, Singapore, and Hong Kong.
  • According to data, the Chinese renminbi saw the largest increase in market share since 2019.
  • Meta Trader is a popular forex trading platform, and 85% of the traders use it.
  • The global foreign exchange market remains open for 24 hours and five days.
  • Kuwaiti Dinar is the most expensive currency in the world, followed by Bahraini Dinar and Omani Rial. The US Dollar is in the 10th Position in the list.
  • Deutsche Bank is the world’s biggest foreign exchange dealer, and speculators generate 90 % of the forex volume

Final Words

Understanding forex market size or structure is a complex process. There are a large number of buyers and sellers, a range of currency pairs, and many strategies and opportunities in forex.

It is the biggest market, and the challenges associated with currency trading are also enormous. Factors like liquidity, volume, and participants significantly impact your trade decision and overall profit or loss.

Before putting your hard-earned money in the market, it is essential to know how the forex market works and what moves it.