Forex Market: The most powerful financial market in the world

What is FX and Why Is It Massive

The Forex market (Foreign Exchange) or FX market is the place where individuals, financial institutions, and companies exchange foreign currencies. This is not just something people do when traveling abroad but a complex trading system involving major participants worldwide.

In terms of size, the FX market is the largest financial market in the world, with a daily trading volume of $6.6 trillion (according to BIS report 2019). To get a clearer picture, compare it to the New York Stock Exchange (NYSE), which has a trading volume of only $22.4 billion per day. That means Forex is nearly 30 times larger than the NYSE!

For the Spot market (a part of the FX market that retail traders understand and participate in), the trading volume still reaches $2 trillion per day, which is about 10-15 times larger than the NYSE. Retail traders account for only 3-5% of the total FX trading volume, or approximately $200-300 billion per day. This volume alone surpasses the largest stock market in the world.

The Forex Market Never Closes: Open 24 Hours, 5 Days a Week

A key difference of Forex compared to other financial markets is that it never closes (except weekends). FX trading continues 24 hours a day because the market rotates through financial centers around the world.

Trading begins in New Zealand (NZD) local time, then moves to Australia (AUD) around 5 AM - 1 PM, followed by Japan (JPY) at 6 AM - 2 PM. After that, the London market (GBP) opens from 3 PM - 11 PM, and finally the US market (USD) opens from 9 PM - 3 AM, before trading cycles back to New Zealand again.

This means investors can trade currencies at any time without waiting for a market open. Similar to stock markets, this continuous operation makes Forex suitable for investors with diverse schedules or those seeking flexibility in trading.

High Liquidity: An Advantage in FX Trading

Liquidity refers to the ability to buy or sell assets quickly without significantly impacting the price. The Forex market has the highest liquidity among all financial markets worldwide.

Due to the enormous trading volume and speculative activities (speculation) that constantly change prices, FX traders benefit from narrow spreads (low Bid-Ask Spread) and the opportunity to trade at the best target prices.

The Forex Market is an OTC Market That Is Safe and Transparent

Unlike stock markets with physical locations, Forex is an Over-the-Counter (OTC) market, where trading occurs electronically. Transactions happen directly between buyers and sellers through a central network.

This design makes the FX market decentralized (decentralized), highly flexible, and with minimal intervention from intermediaries. Retail traders can participate in FX through Forex brokers that provide trading platforms.

Summary: Why Is Forex an Attractive Choice for Traders

The Forex market offers several advantages that make it an appealing financial market for a wide range of investors, from its status as the largest market in the world ($6.6 trillion per day) to its 24-hour trading availability, high liquidity, and transparent market structure. These are the reasons why FX remains one of the most popular and accessible financial markets for traders worldwide.