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Key statistics explaining the worlds largest financial market, Foreign Exchange (Forex), are discussed below. Read on to discover key facts about the forex industry as well as its risks, brokers, traders and software.
By Justin Grossbard / Updated: Tuesday, March 24th, 2020
The Forex market is the largest financial market in the world in terms of trading volume, liquidity and value. Operating 24 hours a day, the global forex industry is valued at 1.9345 quadrillion dollars while turnover is 53 times bigger than the New York Stock Exchange (NYSE) 1. When compared to other financial markets, the forex market is a staggering 12 times bigger than Futures markets and 27 times larger than stock markets 1.
In 2019, the Bank for International Settlements (BIS) found the global forex market has a daily trading volume of $6.6 trillion, a significant increase of 29% since 2016 2. Not surprisingly, Spot Forex is the most popular asset class with $2 trillion worth of spot transactions traded daily in foreign exchange markets. After Spot Fx, the instruments with the largest daily turnover are:
As the largest financial market in the world, forex market participants are mainly financial institutions such as Hedge Funds, Investment Managers, Multinational Corporations, as well as Commerical, Investment and Central Banks. Retail forex trading only accounts for a mere 5.5% of the entire forex market globally 1.
The majority of forex trading is facilitated in five major financial hubs around the world, with 79% of forex trading conducted in the United Kingdom, United States, Hong Kong, Singapore and Japan. The UK is by far the largest fx trading centre, contributing to 43.1% of the worlds foreign exchange turnover 2. With the recent rise in popularity of Forex trading in Asia, China has increased from the 13th to 8th largest forex trading centre in the world 2.
| Largest Forex Trading Centres (2019) | Country | Share of Global OTC Forex Turnover |
|---|---|---|
| 1. | United Kingdom | 43.1% |
| 2. | United States | 16.5% |
| 3. | Singapore | 7.6% |
| 4. | Hong Kong | 7.6% |
| 5. | Japan | 4.5% |
| 6. | Switzerland | 3.3% |
| 7. | France | 2% |
| 8. | China | 1.6% |
| 9. | Germany | 1.5% |
| 10. | Australia | 1.4% |
The global forex market is comprised of over 170 different major, minor and exotic currencies. Although traders’ have a diverse range of currency pair options to choose from, 7 major forex pairs make up 85% of global foreign exchange transactions 2. Below lists the 7 most frequently traded currency pairs and their share of the OTC forex turnover:
The United States Dollar plays a key role in financial markets and international economics due to pegged currencies, dollarization, as well as most Central Banks holding their reserves in USD. Although 43.1% of foreign exchange transactions take place in the UK, 88% of global forex transactions include the USD on one side of the transaction 2, showing the dominance of the USD currency in international forex trading.
The second most popular currency to be included in a forex transaction is the Euro. A boost in turnover of the Euro during the past 3 years can be linked to increased turnover of EUR/CHF and EUR/JPY currency pairs. While the third most likely currency to be included in forex transactions is the Japanese Yen, although turnover has declined since 2016. Unlike the EUR and JPY, turnover of the GBP, AUD, CAD and CHF has remained unchanged over the last 3 years 2.
As a retail investor, speculating on forex involves a very high risk of losing money due to leverage and volatile currency markets. When 35 foreign exchange brokers were assessed, CompareForexBrokers found that on average 71% of retail fx traders lose money when trading forex. Although 29% of retail investors achieve capital gains, 99% of fx traders fail to make profits for more than 4 continuous quarters 3.
What makes forex traders successful and among the 29% of investors who make profits can be linked to the trading strategies executed and knowledge about forex trading signals. Algorithmic trading strategies play an important role in successful forex trading, with 90% of profitable trades utilising Expert Advisors 1 (EAs aka trading robots).
The majority of retail fx investors’ are men, with only 10% of traders being female 4. Although far fewer women trade forex than men, a study carried out by Warwick Business School found females outperform men by 1.8% when investing in financial markets, as men are more likely to take risks and break trading rules, while women follow long-term strategies 5.
In regards to age, 43.5% of traders are aged between 34-45 years, 5% of forex traders are millennials aged between 25-34 while 15% of forex traders are over the age of 45 6.
Australian Broker IC Markets is the largest global forex broker in the world as mentioned in our forex broker reviews. The broker’s trading volume is estimated to be $18.9 billion per day 7, which is significantly higher than competing forex brokers. Retail Forex traders gravitate to IC Markets as they are regulated by top-tier financial authorities ASIC (Australian Securities and Investments Commission), the FSA (The Seychelles Financial Services Authority) and CySEC (Cyprus Securities Exchange Commission).
The second-largest forex broker is XM, a CySEC regulated broker based in Cyprus, followed by the European Saxo Bank (Often called Saxo Capital Markets), which is regulated by 11 regulatory bodies around the globe.
| Largest Global Forex Brokers | Broker | Average Trading Vol. Per Day |
|---|---|---|
| 1. | IC Markets | USD 18.9 billion |
| 2. | XM Group | USD 13.4 billion |
| 3. | Saxo Bank | USD 12.3 billion |
| 4. | Hot Forex | USD 11.5 billion |
| 5. | IFC Markets | USD 9.1 billion |
| 6. | AvaTrade | USD 7.8 billion |
| 7. | FX Pro | USD 6.5 billion |
| 8. | Instaforex | USD 5.8 billion |
The demand for eTrading is continuing to increase, accounting for 56% of forex transactions in 2019 and continuing to replace traditional exchange floor trades 8. In regards to Forex trading platforms, MetaTrader 4 is the most popular platform available to retail investors. In 2018, it was found that 54% of all retail CFDs were traded using MetaQuotes software 9 (MetaTrader 4 and MetaTrader 5). Forex traders tend to prefer Windows over other computer software, with 85% of traders using Windows compatible trading platforms 1.
As continuous technical and fundamental analysis can increase the chances of successful forex trading by 10%-30% 10, today’s forex traders want constant access to their forex brokers and trading platforms. When looking for a new broker to trade forex with, 35% of traders use their mobile to research account types and trading features 1. In regards to traders’ software preferences, Android is 3% more popular than iPhones using iOS software, while Samsung is more popular than other devices. 1.
Prior to the 1970s, forex trading as its known today was prohibited due to the Bretton Woods system. Exchange rates were controlled, therefore traders could not speculate on foreign currency movements. After the collapse of the Bretton Woods system in 1973, floating exchange rates opened the door for modern-day forex trading.
In 1996, the introduction of forex trading platforms allowed retail investors to participate in foreign exchange markets for the first time. Following the introduction of retail traders to forex markets, MetaQuotes began releasing trading platforms designed for retail traders. In 2005 MetaTrader 4 (MT4) was launched, which continues to be the gold standard and most popular retail forex trading platform to date. Although MetaQuotes released MetaTrader 5 in 2010, MT4 still remains the most popular retail trading platform in the world.
Cryptocurrency
The release of the first decentralised Cryptocurrency in 2009 was a pivotal moment in the history of CFD trading and financial markets. Since Bitcoins release, over 6,000 other cryptocurrencies have been created and are usually traded against the USD, EUR or AUD.
The majority of the statistics referenced in this article are sourced from the Bank of International Settlements (BIS) Triennial Central Bank Survey 2019. The survey conducted by BIS is the largest global analysis financial markets focusing on Forex and Over the Counter (OTC) derivatives.
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