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What is FX?

The foreign exchange market – commonly referred to as FX, Forex or the FX market – is the largest and most liquid trading place in the world. It’s daily trading turnover of $5.1 trillion per day out-performs the U.S. stock market daily trading turnover of $257 billion, by billions of dollars.

Forex is traded by banks, institutions, and individual traders. Globally, Forex is preferred due to its extremely high level of liquidity. Liquidity is a key attribute because it allows traders to enter and exit the market 24 hours a day, five and a half days a week. It is also more tolerant of fluctuations in price when compared to less liquid markets. This liquidity can change from one trading session to another and one currency pair to another as well.

The most frequently traded currency pairs are EUR/USD and USD/JPY. These account for approximately 41% of all Forex trades annually. This is a signficant amount considering the size of the Forex market overall.

The US Dollar accounts for approximately 85% of trading volume in the Forex market. The Euro is in second position, at nearly 40% of trading volume. In third place is the Japanese Yen, which consists of almost 20% of trading volume. With volume concentrated mainly in the US Dollar, Euro and Yen, forex traders can focus their attention on just a handful of major pairs.

Trading foreign exchange or contracts for differences on margin carries a high level of risk, and may not be suitable for all investors. There is a possibility that you may sustain a loss equal to or greater than your entire investment. Therefore, you should not invest or risk money that you cannot afford to lose. You should ensure you understand all of the risks. Before using Milton Markets services please acknowledge the risks associated with trading.

The content of this website must not be construed as personal advice. Milton Markets recommends you seek advice from an Independent Financial Advisor.

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