Asides

The Forex Market: Looking Back to Achieve Gains

The verdict is in. Despite the fluctuation in world markets, 2007 witnessed robust growth in Forex trading. The results of the triennial survey of Foreign Exchange and Derivatives Market Activity, conducted by the Bank for International Settlements, paint an interesting picture of a remarkable year:

“The 2007 survey shows an unprecedented rise in activity in traditional foreign exchange markets compared to 2004. Average daily turnover rose to $3.2 trillion in April 2007, an increase of 71% at current exchange rates and 65% at constant exchange rates. Against the background of low levels of financial market volatility and risk aversion, market participants point to a significant expansion in the activity of investor groups including hedge funds, which was partly facilitated by substantial growth in the use of prime brokerage, and retail investors. A marked increase in the levels of technical trading – most notably algorithmic trading – is also likely to have boosted turnover in the spot market.” – Bank for International Settlements (BIS)

Some quick facts regarding Forex trading:

• The primary participants: Central Banks, commercial and investment banks, hedge funds, corporations, and private investors
• The free-floating currency system has been in place since the early 1970s, and was officially ratified in 1978
• Online trading began in the mid ‘90s
• A 24-hour per day market from Sunday 5pm EST to Friday 4pm EST
• Trading begins in New Zealand and ends in America each day
• Largest financial market in the world, with $3.2 trillion in average daily turnover, equivalent to:
  • 35 times the average daily turnover of the NYSE
  • More than 10 times the average daily turnover of global equity markets
  • Nearly $500 per day for every person on earth!
• The US and UK account for just over 50 percent of all activity in the Forex Markets
• The US dollar is involved in over 80% of all Forex transactions (more than $2.7 trillion per day)

Hedge Funds

One of the key components of the exponential growth in the Forex market from 2004 to 2007 was the introduction of hedge funds to the mix. These well-funded and smartly managed private entities are currently the largest and most influential force on Wall Street. They are renowned for the consistent returns they provide their members. That they turned their attention to Foreign Exchange in recent years is reason for the individual speculative investor to take notice.

Forex Forecast

For the informed investor, the Forex forecast for 2008 appears bright. As with most things in life, it is more about whom you know than what you know. Receiving reliable information and advice from a reputable source is essential to success.

Tags: forex, forex market, forex trading, online trading, trading, hedge funds

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