In this series of Forex training topics, we try to explain the concept of Forex to you. Simply put: Forex is a global marketplace that allows one to trade two currencies or currencies.
If you think one currency will be stronger than another and you bought that currency and it turns out to be correct in the end, you can make a profit.
If you have ever traveled to another country, you have noticed that you usually have to find an exchange booth at the airport and convert the money you have in your bag into the currency of the country you entered.
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You enter an exchange office and notice a sign that shows different rates for different currencies.
What you see on Tylo is the conversion rate. The conversion rate is the ratio of the prices of two currencies of two different countries.
Now you find the “Japanese Yen” on the board and you think to yourself, “Wow! Is my one dollar worth 100 yen ?! And I have ten dollars! So I get rich !!! “
When you do so, essentially participated in the forex market!
You have exchanged one currency for another.
Or so-called Forex trading, if we assume that you are an American who went to Japan, it is as if you sold the dollar and bought the yen.
Before returning home, you stop in front of an exchange booth to convert your yen, which is miraculously left in your pocket (Tokyo is an expensive city!) Into dollars, and you notice that the exchange rate has changed. .
It is the exchange rate changes that allow you to make money in the Forex market.
What is Forex?
The foreign exchange market, commonly known as “Forex” or “FX”, is the largest financial market in the world.
The FX market is a global, decentralized market, meaning that it has no physical center in the world, and the world’s currencies are traded hand in hand. The exchange rate changes every second, so a market is constantly melting and flowing.
Only a small percentage of currency exchanges occur in the “real economy”, including international trade and the tourism industry (example at the airport).
Instead, most of the currency exchanges that take place in the global currency market are for the purpose of speculation and fluctuations in buying (and selling).
Currency traders (also known as currency fluctuators) buy currency in the hope that they will be able to sell it at a higher price in the future.
Compared to the small $ 22.4 billion daily volume of the New York Stock Exchange (NYSE), the $ 6.6 trillion foreign exchange market volume per day seems like a giant trading volume.
Be careful, trillions!
It seems that it is much better not to compare the Forex market with the Tehran Stock Exchange at all (the daily trading volume on the Tehran Stock Exchange is about half a billion dollars!).
Let’s better understand the dimensions of the subject using the image of monsters…
Comparing the volume of the Forex market and the New York Stock Exchange
The world’s largest stock market is the NYSE, with a daily trading volume of about $ 22.4 billion. If we use a monster to represent the New York Stock Exchange, this is the picture…
it is scary. It seems to be big and decisive. It may even be attractive to some.
You hear the news about the stock market in the news every day… on the radio or on TV, Telegram, Instagram and other social networks! You may even hear about the stock market in Ahmad Agha Street and Supermarket Gymnasium: “Today, the Tehran Stock Exchange index increased … So and so”
When people talk about “bazaar”, they usually mean the stock market. So the stock market looks big, it has a loud voice and it likes to make a lot of noise.
In fact, the New York Stock Exchange is very small compared to the Forex market! And there really is no chance!
See chart of average daily trading volume of Forex market, New York Stock Exchange, Tokyo Stock Exchange and London Stock Exchange:
What is Forex?
The Forex market is more than 200 times bigger! It is very huge! But wait, there’s a point in the middle!
The real volume of the Forex market
That huge figure of $ 6.6 trillion covers the entire global foreign exchange market, but the “instant” market, which is part of the foreign exchange market and includes most foreign exchange traders, is less than $ 2 trillion a day.
And also, if you just want to calculate the daily trading volume of small traders (this is us), it is even less than this amount.
It is very difficult to determine the exact amount of forex retail trading, but it is estimated to be about 3-5% of the total daily Forex trading volume, ie about $ 200-300 billion (maybe even less).
So, you still see that the Forex market is definitely huge, but not so big that others are eager to inspire.
“Forex is $ 6.6 Trillion!” Do not believe. This huge figure sounds impressive, but a little misleading. We do not like to exaggerate, we only say the true amount.
Despite its size, this market rarely closes! In other words, it is open almost around the clock.
The Forex market is open 24 hours a day, 5 days a week and is closed only on weekends.
So unlike stock markets or bonds, the Forex market does not close at the end of each trading day.
In fact, transactions are only transferred to various financial centers around the world.
Forex trading day starts with the awakening of traders in Auckland / Wellington Australia, then goes to Sydney, Singapore, Hong Kong, Tokyo, Frankfurt, London and finally to New York and resumes trading in Wellington!
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