What is foreign exchange? Quite simply, it is a global market that allows one currency to be exchanged for another. If you have been to other countries, you usually have to find a currency exchange at the airport and then convert the money in your wallet into the currency of the country you are visiting. You go to the counter and notice that a screen shows different exchange rates for different currencies.
You go to the counter and notice that a screen shows different exchange rates for different currencies.
You find “yen” and think for yourself, “Wow! My dollar is worth 100 yen?! I have ten dollars! I want to be rich!!!”
When you do this, you basically participate in the foreign exchange market! You changed another currency.
Or in the terms of the foreign exchange transaction, assuming you are an American visiting Japan, you have sold dollars and bought the yen.
Before you fly home, you stop at the currency exchange to exchange your miraculous yen (Tokyo is expensive!) and notice that the exchange rate has changed.
It is these exchange rate changes that allow you to make money in the foreign exchange market
The foreign exchange market is often referred to as “foreign exchange” or “foreign exchange” and is the world’s largest financial market.
Compared to the New York Stock Exchange (NYSE) daily $22.4 billion “negligible” trading volume, the foreign exchange market has a daily trading volume of $500 million, which seems absolutely huge.
It looks scary. Some people may even feel sexy.
Every day you hear the news of the New York Stock Exchange in the news… on CNBC... in Bloomberg… on the BBC… oh, you might even be in the local The gym has heard of it. “The New York Stock Exchange rose today, wait, and so on.”
When people talk about “markets,” they usually mean the stock market. So the New York Stock Exchange sounds big, loud, and likes to make a lot of noise.
But if you really compare it to the Forex market, it looks like this…
Oh, compared to the foreign exchange market, the New York Stock Exchange looks so insignificant! It has no chance!
View the average daily trading volume chart for the Forex market, the New York Stock Exchange, the Tokyo Stock Exchange and the London Stock Exchange:
The money market is more than 200 times! That’s great! But grab your horse and have a catch!
This huge $5 trillion figure covers the entire global foreign exchange market, but the daily volume of retail traders (ie us) accounts for 5-6% of the total transaction volume, or between $30 billion and $40 billion.
So you see, the foreign exchange market is absolutely huge, but not as big as others want. We don’t like to exaggerate. We just keep it real.
In addition to its size, the market is rarely closed!
The foreign exchange market is open 24 hours a day, 7 days a week, and is closed only on weekends. (How many slackers!)
Therefore, unlike the stock or bond market, the foreign exchange market will not be closed at the end of each working day.
Instead, transactions are only transferred to different financial centers around the world.
The trader woke up in Sydney and moved to Tokyo, London, Frankfurt, and finally to New York, then started trading again in Sydney!
In the next section, we will reveal the exact content of the transaction in the foreign exchange market.