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.
The worldwide 2021 forex market is worth $2,409,000,000 ($2.409 quadrillion). $6.6 trillion on average every day is traded on foreign exchange markets. This is significantly higher than the previous analysis done by the Bank for International Settlements (BIS) in 2016 when it was valued at $1.934 quadrillion dollars.
The forex market is the largest financial market in the world in terms of trading volume, liquidity and value. Unlike other markets such as equities, the forex industry is the only financial market with 24/7 availability.
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 commercial, investment and central banks. Retail forex trading only accounts for a mere 5.5% of the entire forex market globally.
The majority of forex trading is facilitated in five major financial hubs around the world, with 79% of forex trading occurring 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. 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.
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, seven major fx pairs make up 68% of global foreign exchange transactions. In 2019, the 7 most frequently traded currency pairs and its share of the OTC forex turnover was the:
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, showing the dominance of the USD currency in international forex trading.
The second most likely 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, turnover has declined since 2016. Unlike the EUR and JPY, the volume of GBP, AUD, CAD and CHF being traded has remained unchanged over the last 3 years.
The average daily turnover for emerging currencies has increased recently. In 2016, 21% of total forex turnover could be attributed to emerging currencies, compared to 24.5% last year.
As a retail investor, speculating on forex involves a very high risk of losing money due to high 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.
The majority of retail fx investors’ are men, with only 10% of traders being female. 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.
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.
Australian Broker IC Markets is the largest Australian-based forex broker in the world as mentioned in our forex broker reviews. 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). Pepperstone is the second-largest and overseen by ASIC, the FCA (Financial Conduct Authority, UK) and the DFSA (Dubai Financial Services Authority).
The largest US forex broker is XM, regulated by a range of financial authorities including CySEC in Cyprus while the largest forex brokers in Europe are XM and Saxo Bank (often called Saxo Capital Markets).
MetaTrader 4 is the most popular trading platform currently available to retail investors. In 2018, it was found that 54% of all retail CFDs were traded using MetaQuotes Software (MetaTrader 4 and MetaTrader 5). Forex traders tend to prefer Windows over other computer software, with 85% of traders using Windows compatible trading platforms.
A key reason MetaTrader 4 (MT4) and MetaTrader (MT5) are so popular is due to the software’s advanced tools designed to assist those executing trading strategies such as day trading or Expert Advisers. If you want to explore the platforms before you sign up to a live account, most forex brokers offer demo accounts that provide real-time trading conditions.
As continuous technical and fundamental analysis can increase the chances of successful forex trading by 10%-30%, 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. In regards to traders’ software preferences, Android is 3% more popular than iPhones using iOS software, while Samsung is more popular than other devices.
Prior to the 1970s, forex trading as its known today was prohibited due to the Gold Standard and Bretton Woods systems. 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.
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 that are usually traded against the USD (US dollar), EUR (Euro), GBP (Great British Pound) or AUD (Australian Dollar). The total value of Cryptocurrency markets is now estimated at $201 billion dollars.
Disclaimer: cryptos carry even higher risk than forex and other CFDs because of the historically high volatility in crypto markets. Due to this, the UK’s financial authority (the FCA) banned cryptocurrency trading for retail traders in 2020.
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 of financial markets focusing on Forex and Over the Counter (OTC) derivatives.
Justin Grossbard has been investing for the past 20 years and writing for the past 10. He co-founded Compare Forex Brokers in 2014 after working with the foreign exchange trading industry for several years. He also founded a number of FinTech and digital startups including Innovate Online and SMS Comparison. Justin holds a Masters Degree and an Honours in Commerce from Monash University. He and his wife Paula live in Melbourne, Australia with his son and Siberian cat. In his spare time, he watches Australian Rules Football and invests on global markets.