fThis market, global in nature, is the second largest financial market in the world in terms of overall volume, behind the interest rate. However, it is the most concentrated and the first for the liquidity of the most treaties, such as the euro / dollar: the average daily volume of trade was in 2007, 3,210 billion U.S. dollars, an increase of 71% volumes compared to the previous study in 2004 (to nearly four thousand billion dollars (four billion) daily). All figures below are from the three-year study on the foreign exchange market by the BIS (Bank for International Settlements)
The average volume is as follows:
1 005 billion in spot transactions,
362 billion in futures and
1 714 billion in swaps
almost solely in OTC transactions,
Transactions in volume were:
43% between banks;
40% between a bank and a fund manager or a nonbank financial institution;
and finally to 17% between a bank and a non-financial
and also individuals that use the platforms of the banks
To provide coverage for their clients, 24 hours 24, each bank has a large trading room on three continents. In a team located in Asia or Australia succeeds another located in Europe and finally a third located in North America, and so on.
However, despite this world and this time spread between continents, a substantial part of market activity is physically located in London.
According to the latest report of the BIS as of 2010, trading on the foreign exchange market increased by 20% since 2007 to reach 3.981 trillion dollars. The United Kingdom and the United States remains far ahead of trade, with more than 36.7% of market share to 17.9% for London and the United States. France is far behind, with only 3% of world trade, a significant decline since 1995. In addition, the vast majority of transactions are speculative (and do not last more than 7 days) and not commercial. History [edit]
See: U.S. Dollar and Currency
The foreign exchange market has existed in its current form, called a floating exchange rate regime since March 1973 and the abandonment of fixed exchange rates of various currencies against the dollar standard end of Bretton Woods in 1944. Forex Features [edit] Floating rates and fixed rates [edit]
It should make the distinction between so-called floating currencies and fixed currency called. The rate of a currency is fixed arbitrarily set by a state (indexed on a major currency in general as the euro or U.S. dollar) and can be amended only by a decision of that State. The rate of a floating currency depends, in turn, only to market fluctuations, he suffered just the influence of supply and demand.
Major currencies like the euro, the U.S. dollar, British pound, Canadian dollar ... are examples of floating currencies. The so-called exotic currencies such as the Chinese yuan, are examples of currencies at fixed rates. When trader? [Edit]
The Forex market is open 24 hours on 24. Indeed, the major stock exchanges around the world take turns (London and New York and Sydney, and Tokyo) are causing no disruption to traders, except for weekends. Thus, the quotations on the Forex began Sunday evening with the opening of the Sydney Stock Exchange (22h GMT plus or minus one hour too) and stop on Friday evening after the close of trading in New York (22h GMT plus or minus one hour depending on the shift in Daylight Saving Time).
While open 24 hours in 24 weeks, the bulk of the activity takes place when the London Stock Exchange is open. Also note that the market is traditionally quieter on Monday (because there is no important economic figure) and more volatile over the weekend, often with a maximum on Friday (day of release of economic data the most important) 1 2. Quote [edit]
In Forex, it always expresses the rate of one currency against another. This is called a listing on certain. Take the example of trading the EUR / USD in April 8, 2011: "EUR / USD = 1.4307." We must translate this quotation as "1 euro equals 1.4307 U.S. dollars."
The motto on the left is called the base currency (USD here), the right is called the motto of part-cons (by USD). And listing is always read in the same order (we express the base currency according to the currency against-part).
The smallest difference in rating possible is the pip, or percentage point in (en). This is the fourth decimal place of trading. For example, if the market moves from 1.4307 to 1.4309, while the price increased from 2 pips. Leverage [edit]
A key feature of trading Forex is the big leverage offered by brokers (up to 400 at some dealers, compared to 5 in the SRD for the stock market). Leverage allows you to bring to market an amount up to 400 times higher than the trader has, while maintaining a margin sufficient to cover potential losses. Leverage too much, coupled with a misunderstanding of the market, is also the cause of ruin of many individuals as the Forex market is 2-3 times less volatile than the stock market. Treated products [edit] Spot [edit]
Spot (spot they say), the main parities were treated in 2004, according to BIS:
the euro / dollar - 28%
the dollar / yen - 17%
the sterling / dollar (known cable in English) - 14%
Despite the strong development of the euro, the dollar remains the dominant pivot, present in 89% of transactions (37% against the euro, the yen 20% and 17% for the pound sterling, all on a total of 200% since each transaction involves two currencies). For a non-European currency XXX, a transaction between the euro and the currency is generally broken down into a transaction EUR / USD and USD transaction / XXX. The currency pair EUR / XXX is then called a cross. Forward exchange [edit]
The forward exchange, is no more or less, a spot with a date of payment / delivery delayed in time. It consists of two products: a foreign exchange swap over a spot. This is the simplest and the main product used for the covers, where the volumes generated on the swaps, higher than the volumes on the spot. Currency options [edit]
Finally, the market for currency options is the most diverse and most inventive of the options markets. He is responsible for virtually all forms of so-called exotic options or second generation (barrier options, Asian options, options on options, etc.).. Trading and foreign exchange [edit] Cover (hedging) [edit]
The idea is to take a position contrary to the natural position, induced by holding foreign assets (plant, raw material purchasing, export earnings, etc.).. The goal is to cancel or reduce the risk. It is a technique widely used by professionals. This, for example, if a European institutional investor who has agreed to buy U.S. stocks. It is then likely to change because if the dollar falls, the equivalent in euro of its U.S. securities fall. To become immune to this risk, it will then sell the dollar equivalent of the shares he has bought. This will be done using a foreign exchange swap.
Prediction [edit]
This is to anticipate market movements through observation more or less advanced financial environment, economic and political. The importance of the anticipation of exchange rate movements is speculation. For this, many sources of information are available to the forex trader (Reuters, Telerate, Bloomberg LP) allowing access to all quotes and financial information useful for its trading. It also has access to major economic indicators and the global financial information. It is able to form an opinion on the evolution of prices or rates and thus to anticipate future movements. Arbitration [edit]
It is to try to take advantage of discrepancies in price or ad hoc courses on the same media, the same currency on two different markets. Arbitration can perform these operations in a single market-such as spot-or multi-markets such as currency swaps. Powerful tools (called pricers) enabling it to calculate different prices or interest of an arbitrage transaction. Since the execution speed required, and the amounts immportants to gamble for the operation to be profitable this type of strategy is possible only by professionals
