Speculative turnovers in currency exchange
The volume traded in Forex today is so high that no data is available, but every three years, the BIS (Bank of
International Settlements) publishes the results of a survey made among major market participants and creates an estimate based on the responses obtained.
The most recent report, completed in 2007, estimated the average global daily volume at about 3.2 trillion traded in the world's main financial markets, of which an estimated 95% is speculative. Its daily transaction volume is about 100 times that of all the stock-exchanges together. The fact that 95% of the market is speculative means that most of the participants buying a currency really have no intention of receiving that particular currency. They're watching their price movement to sell it back for a profit when it has increased in value.
The other 5% of the daily turnover come from companies hedging their exposures and governments exchanging foreign currencies and reserves.
85% of the turnover is done in the major currencies against the Dollar where there is the most important liquidity, allowing fast fills in and out of the market. You can find just above a link to a table excerpted from the last Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity of 2007.
In the most recent results in which the BIS classifies exchange volume by country, London remains the capital of the FOREX market. The EUR/USD pair is the most traded, and it is not a coincidence that the pair has the lowest spreads - the width between bid and offer price. Generally, in the interbank market, the higher the volume, the lower the spreads are.
In the next chapters you will learn what spreads are and all about the market mechanics, but for now we will show you how this market is composed and who moves and shakes it!
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The volume traded in Forex today is so high that no data is available, but every three years, the BIS (Bank of
International Settlements) publishes the results of a survey made among major market participants and creates an estimate based on the responses obtained.The most recent report, completed in 2007, estimated the average global daily volume at about 3.2 trillion traded in the world's main financial markets, of which an estimated 95% is speculative. Its daily transaction volume is about 100 times that of all the stock-exchanges together. The fact that 95% of the market is speculative means that most of the participants buying a currency really have no intention of receiving that particular currency. They're watching their price movement to sell it back for a profit when it has increased in value.
The other 5% of the daily turnover come from companies hedging their exposures and governments exchanging foreign currencies and reserves.
85% of the turnover is done in the major currencies against the Dollar where there is the most important liquidity, allowing fast fills in and out of the market. You can find just above a link to a table excerpted from the last Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity of 2007.
In the most recent results in which the BIS classifies exchange volume by country, London remains the capital of the FOREX market. The EUR/USD pair is the most traded, and it is not a coincidence that the pair has the lowest spreads - the width between bid and offer price. Generally, in the interbank market, the higher the volume, the lower the spreads are.
In the next chapters you will learn what spreads are and all about the market mechanics, but for now we will show you how this market is composed and who moves and shakes it!