04-29-2007, 02:39 PM
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A Detailed Overview of the Forex Market
A Detailed Overview of the Forex Market
Introduction
The following facts and figures relate to the foreign exchange market. Much of the information is drawn from the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2004, and published in March 2005. 52 central banks and monetary authorities participated in the survey, collecting information from approximately 1200 market participants.
Structure- Decentralised, over-the-counter market, also known as the 'interbank' market
- Main participants: Central Banks, commercial and investment banks, hedge funds, pension funds, corporations & private speculators
- The free-floating currency system began in 1973, and was officially mandated in 1978
- Online trading began in the mid to late 1990's
Source: BIS Triennial Survey 2004
Trading Hours- 24 hour market
- Sunday 5pm EST through Friday 4pm EST.
- Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America
Size- Largest financial market in the world
- $1.9 trillion average daily turnover, equivalent to:
- More than 10 times the average daily turnover of global equity markets1
- 40 times the average daily turnover of the NYSE2
- $300 a day for every man, woman, and child on earth
- An annual turnover more than 10 times the value of all the world's goods and services combined (GDP)3
- The spot market accounts for about one-third of daily turnover
1. About $167 billion - World Federation of Exchanges aggregate 2004
2. About $46 billion - NYSE 2004
3. About $36 trillion - World Bank 2003
Major Markets- The US & UK markets account for more than 50% of turnover
- Major markets: London, New York, Tokyo
- Trading activity is heaviest when major markets overlap4
- Nearly two-thirds of NY activity occurs in the morning hours while European markets are open5
4. NY Federal Reserve 5. NY Federal Reserve
Average Daily Turnover by Country
Concentration in the Banking Industry- 16 banks account for 75% of turnover in the U.K.
- 11 banks account for 75% of turnover in the U.S.
- 11 banks account for 75% of turnover in Japan
Note: The reference here is to individual banking offices rather than banking organisations.
Trading- An estimated 95% of transactions are speculative
- More than 40% of trades last less than two days
- About 80% of trades last less than one week
- Retail brokers research: 90% of traders lose money, 5% break even, 5% make money
Technical Analysis
Commonly used technical indicators:- Moving averages
- RSI
- Fibonacci retracements
- Stochastics
- MACD
- Momentum
- Bollinger bands
- Pivot point
- Elliott Wave
Currencies- The US dollar is involved in approximately 90% of all foreign exchange transactions, equivalent to over US$1.5 trillion per day
Currency Codes- USD = US Dollar
- EUR = Euro
- JPY = Japanese Yen
- GBP = British Pound
- CHF = Swiss Franc
- CAD = Canadian Dollar
- AUD = Australian Dollar
- NZD = New Zealand Dollar
Average Daily Turnover by Currency
N.B. Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.
Currency Pairs- Majors: EUR/USD, USD/JPY, GBP/USD, USD/CHF
- Dollar bloc: USD/CAD, AUD/USD, NZD/USD
- Major crosses: EUR/JPY, EUR/GBP, EUR/CHF
Average Daily Turnover by Currency Pair
Last edited by leveragefx : 04-29-2007 at 03:04 PM.
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