In 2019, the global foreign exchange market (forex) was valued at a jaw-dropping $2.4 quadrillion.
In fact, this is equal to more than 50 times China, Japan, Germany, India and the U.S.’s economic output combined. Institutional investors, such as investment banks, pension funds, and large corporations have typically dominated this space, but there are avenues for individuals to enter the market as well.
This infographic from Compare Forex Brokers breaks down the world’s most interconnected financial market, and how individual investors can start trading.
The Forex Market: A Global Landscape
Across the forex market, 170 major, minor, and exotic currency pairs can be traded as contracts for difference (CFDs). A CFD enables you to speculate on whether the price of an asset will rise or fall.
Here, trades are conducted on over the counter (OTC) markets—non-centralized markets made up of a network of participants. This is different from traditional markets, such as the S&P 500 and the Nasdaq, which operate on formal, centralized exchanges.
While the forex market is by nature, decentralized, these core regions show where forex transactions are most concentrated by market participants including banks, commercial businesses, or individual investors.
Globally, the majority of forex trading takes place within the following hubs.
Forex Trading Centers (2019) | Country | Share of Global Over the Counter (OTC) Forex Turnover |
---|---|---|
1 | UK | 43.1% |
2 | U.S. | 16.5% |
3 | Singapore | 7.6% |
4 | Hong Kong | 7.6% |
5 | Japan | 4.5% |
6 | Switzerland | 3.3% |
7 | France | 2.0% |
8 | China | 1.6% |
9 | Germany | 1.5% |
10 | Australia | 1.4% |
Source: BIS
The UK accounts for over 43% of global forex trading, averaging $2.7 trillion daily according to the 2019 Triennial Central Bank Survey by the Bank for International Settlements. London’s geographic location between the U.S. and Asia makes it an optimal forex trading centre—a trend that has held strong over the last 50 years.
With forex trading in the U.S. jumping over 50% in the last decade, the U.S. is the next most active forex market. Meanwhile, averaging $633 billion in trading volumes in 2019, Singapore is Asia’s largest forex trading center, with Hong Kong following close behind.
The Top Seven Currency Pairs
What are the most highly-traded currency pairs?
Overall, 68% of global forex trading falls into seven major currency pairs.
Top Seven Currency Pairs | Percentage of Total | |
---|---|---|
1 | United States Dollar vs Euro | 24.0% |
2 | United States Dollar vs Japanese Yen | 17.8% |
3 | United States Dollar vs Great British Pound | 9.3% |
4 | United States Dollar vs Australian Dollar | 5.2% |
5 | United States Dollar vs Canadian Dollar | 4.3% |
6 | United States Dollar vs Chinese Yuan | 3.8% |
7 | United States Dollar vs Swiss Franc | 3.6% |
Source: BIS
Currency prices are impacted by factors including inflation, international trade, political stability, among other macroeconomic factors.
Breaking Down Institutional and Retail Trading
While…
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