15 facts about Forex Trading

15 facts about Forex Trading

There are several astonishing facts about forex.

The forex market is the most liquid in the world.

The forex is a dynamic market with a world of its own.

So, why not know more about the industry.

Here I’ll share 15 facts about forex trading.

So, let’s dive into further details.

Ted Capwell

Content

Forex sees a massive daily volume

Forex sees a massive daily volume

As I told you earlier, forex is the most liquid market.

You may have heard this fact.

Whenever you search for forex, this fact comes up.

Let’s see how big the market is.

The market is genuinely gigantic when we compare it with others.

Market is genuinely gigantic

Imagine a situation where there are two boxers.

One is in red and one in blue.

On one side, there’s a giant.

And on the other side, there’s a baby.

It is the best analogy for comparing forex with other markets.

Every day, the FX market sees about $6 trillion in transactions.

Money just floods in from Monday through Friday.

It is a massive sum of money.

That is why forex is known as the world’s largest market.

To give you an idea, trillions have 12 zeros in them.

If we compare, the stock market would see $25 billion in daily transactions.

As a result, the market offers several options.

You and I can also get our hands on this massive market.

And we can make some cool pips in the process.

Forex trading started longer than you think

Forex trading started longer than you think

The origins of forex date back to ancient times.

No, I’m not joking!

Let’s rewind the clock and go back in time.

Forex, according to some, dates back to biblical times.

The Egyptian money market traced back to the fourth century.

As we evolved, so did our way of doing trade.

FX began in the Netherlands 500 years ago, astonishing if we’re talking about recent history.

It happened because merchants wanted free trade.

A brief history of Forex trading

By 1875, we had a standard Gold system in place.

With the Bretton Woods system in 1944, the gold standard ended.

We had free-floating exchange rates in 1972.

It trades in pair

It trades in pair

You trade two currencies in forex.

They are base and quote.

Let’s see how forex trades in pairs.

On the broker’s platform, you’ll see pairs.

On the left side, we have a base, while on the right, we have a quote.

You buy the quote with base currency.

So that’s how forex trades in pairs.

I’ll explain this in simple words.

When you go abroad, you use the country’s currency.

You buy one currency in exchange for another.

So, there is an exchange involved.

170 pairs to trade

170 pairs to trade

There are many pairs to trade.

Did I tell you there are 170 FX pairs?

If I haven’t then let me explain:

FX pairs have backing from the state.

They don’t just pop out one day and decide to list themselves.

Every country does trading.

So, they buy something and also offer something.

When countries do trading, they exchange currencies.

Forex explained

Now what’s important to mention are the types of FX pairs.

They are majors, minors, and exotics.

The critical element is majors are USD.

It’s in all of them.

Minors comprise developed nations’ currencies.

They include EUR/JPY, RUR/CAD, EUR/GBP, and many more.

The minor volume FX pairs are exotics.

They are super volatile.

And can raise to 100 to 200 pips in a day.

Examples include; USD/SEK, GBP/ZAR.

So, you have a plethora of choices for the FX market.

FX market circles around USD

FX market circles around USD

Well, you don’t have to have an Einstein brain to understand this fact.

The US is the largest economy in the world.

All trades happen in USD.

Let’s dig deeper into this.

I mentioned the types of pairs above.

Whatever occurs in the US, the FX majors can go wild.

One good example of this is the US president tweeting.

The POTUS tweets some random thing about USD.

The USD would strengthen, and others would become feeble.

So the USD would grow in comparison to other currencies.

And this is only one example.

Interest rates, inflation, and the economy in general.

They all have an impact on the value of the US dollar.

The UK is the heart of the forex market

The UK is the heart of the forex market

You’re thinking about how this is possible.

The US dollar receives the most significant attention.

So, why is the United Kingdom at the core of the currency market?

Well, let’s find out.

First, London has long been a worldwide trade powerhouse since Britain Empire.

Forex plays a gigantic role in the UK

It involves more significant currency exchange transactions.

So, FX plays a gigantic role in the UK.

85% of FX trading occurs in the forex majors

85% of FX trading occurs in the forex majors

As I mentioned above, USD is the sun of the market.

All others are planets revolving around it.

FX majors have $ in them.

So, it’s a match made in heaven.

The highest volume comes from seven forex pairs.

These seven pairs are EUR/USD, GBP/USD, USD/JPY, AUD/USD, NZD/USD, USD/CHF, and USD/CAD.The highest volume comes from seven forex pairs.

As you can see, they are all major economies.

So, their trading activity is massive.

No wild west swings in forex

No wild west swings in forex

Probably, you would have seen your positions go up and down.

But did you notice forex pairs making crazy moves?

Yeah, the market can make wild swings, but very often.

Why is that?

The forex market comprises fiat currencies.

The states are backing these currencies.

Whenever something happens, central banks intervene.

They took drastic measures to stabilize currency rates.

When this happens, the forex market doesn’t go all yahoos.

So, that’s how forex tends to stay calm.

It is an excellent advantage for you.

You can hold or take positions easily.

However, one can’t get away from losses.

No vanishing mode for forex

No vanishing mode for forex

Unlike a magic trick, forex will never vanish.

One can argue conventional currencies are not the future.

It is, however, doubtful.

Let’s take a look at why.

First, currencies are the symbol of a country’s culture and identity.

These things do not vanish.

GBP, for example, isn’t going away anytime soon.

It depicts how the United Kingdom interacts with its international economic partners.

So, we have a forex market as far as we have currencies.

Three cheers to forex!!!

You can start with minimum capital

You can start with minimum capital

Now you can open a forex account with a minimum of $5.

Nope, it’s not a joke; it’s a fact.

Some brokers allow you to start trading with only $5.

However, this wasn’t always the case.

To begin forex trading in the 1970s, you would have needed millions of dollars.

The major participants were financial institutions back then.

Only a handful of retail traders were trading.

With the internet boom, the market became accessible.

Now, you don’t need significant capital.

You only need internet, a PC or a phone and voila!

Only 5% of retail traders make the market

Only 5% of retail traders make the market

While it is easy to enter, only 5% of retail traders are successful.

So, what’s the reason behind this?

The reason is financial institutions.

These financial institutions are the big fish.

These fish have big sums to spend on.

What Do I Do When I Trade Forex

And they are the ones who control the forex market.

So, the next time you see a trade going you, chances are it’s because of big fish.

Deutsche Bank is the largest forex dealer

Deutsche Bank is the largest forex dealer

When talking about big fish, Deutsche bank is the largest.

Do you think why the German Bank is at the top?

Well, the German investment bank is one of the largest banks in the world.

It has been around since 1870.

It has a 21% share in the foreign exchange market.

That’s massive!

Only 5% of traders survive the market

Only 5% of traders survive the market

Forex is a dynamic market.

It has large sums, but most traders don’t get the market.

Let’s see why.

Forex depends on several factors.

Economic data, geological situations, even natural disasters can impact currencies.

Many traders think it is an easy market.

So, they enter without analyzing these factors.

And that’s when they lose.

According to stats, 95% of people fail.

44% of forex traders are millennials

44% of forex traders are millennials

The adrenaline rush of forex isn’t for the faint-hearted.

That’s why many people want to hop on the forex train.

Let’s dig a bit deeper into this.

44% of forex traders are between the ages of 25 and 34.

With the market easily accessible, many young people are joining in.

With the market easily accessible, many young people are joining in

Plus, many young people are looking to diversify their investments.

So, forex provides them with plenty of opportunities.

Women are better traders than men

Women are better traders than men

We’ve all heard about men’s success tales in the forex industry.

Women, on the other hand, are statistically better traders than males.

So let’s take a look behind the curtain.

Women outperform males in forex trading.

Women are better traders than men by 1.8%.

However, women trade way less than males.

China has the most forex reserves

China has the most forex reserves

While USD is the most popular currency, China has the most forex reserves.

You didn’t see that coming, did you?

Well, it’s no surprise!

China’s economy has been on the rise since the 1980s.

They started accumulating forex reserves for the betterment of the economy.

So, they increased their USD reserves.

According to an estimate, China has $3399 billion forex reserves.

Bottom line

So, there you have it!

Now you can impress anyone with these 15 forex facts.