The $5.3 Trillion Forex Market Explained

Something ain't right.
Spot forex 2 trillion per day
and yet the transaction cost is insanely high.

Woaw! Those numbers are mind-blowing and ridiculous....If 2 trillion is trading in a daily basis, I truly believe that most of us simply trading for the sake of it because the majority of us are breaking-even in order for the cycle to keep going.

Forex market is a big giant and i think those 5.3 trillion $ ruin many lives on daily basis.

no doubt indeed

And yet brokers don't make much money compared to other markets....

Nice One1

to trade forex it is hell all the time lose and think as a dump.

over 85% of the volume is just hedging, and retail traders platfforms account for nearly 50% of the real unhedged volume.

Do you really believe that 2 trillion dollars go thru the metatrader platforms -- and other retail platforms -- every day ?
If you believe it, I have a nice bridge in Brooklyn, NY I would like to sell ...

5.3 T is a big number. if this is true we have more chance to make money and to lose too.

I think that this number is not true at the time. Maybe this number was true during 2008-2009.

The myth of the $5.3 trillion dollar a day market:

According to the Bank of International Settlements, trading activity in currencies breaks down as follows:
spot fx - 38%
fx swaps - 42%
outright forwards -13%
fx options - 6%
currency swaps - 1%

Thus fx swaps account for a bigger share of trading than spot fx. In spot fx, many trades are "hot potato" trades, that is, passing a position from Tokyo to London then to New York. So actual "new" postions are inflated by a factor of at least 3.
Spot fx is not as liquid as many think. Most traders are unaware of this because they're trading through a market maker broker where their orders are always filled. However those orders are filled because the broker is taking the other side. In the interbank market, filling an order is not guaranteed.

The $5.3 trillion number is the BIS figure from April 2013, so it's 1 1/2 years old. Still, the percentages don't change that much from year to year. The fx swap market is bigger than the spot market.

"Do you really believe that 2 trillion dollars go thru the metatrader platforms -- and other retail platforms -- every day ?
If you believe it, I have a nice bridge in Brooklyn, NY I would like to sell ..."

Mingary is quite correct on this. Metatrader is used by retail traders. It's favored by brokers because one can add all sorts of pretty, useless indicators designed for the retail trader to lose his or her money faster. No one in the actual interbank market uses it.

Indeed I feel real pity for anyone who does not understand how powerful and effective most indicators are and how by far superior they are to follow silly bits of news and deluding oneself that in fact he is market aware based on the silly and random thoughts of half baked analysts. Those indicators measure the ROC of price per interval and if you know what that means it is the objective measure of market sentiment on an all things considered basis and nothing is more accurate than that for reading the markets. Anyone denied access to such tools is grossly disavantaged. MT4 is as such a money machine for those who know how to use it.

The Crow (-_-)

I agree with your logic about news, as the majority of it is useless, and only mildly taken into consideration by PA traders as a whole.

However, most indicators, though true they are a tool, are mostly akin to the tools we have on our cars for driving, side view and rear view mirrors. When first starting to drive, one quickly becomes aware of their importance, if one is trying to go backwards. Using those same tools to predict road patterns ahead, thus attempting to maintain position on the roadway, one finds out just how little information they provide, with the odds of a crash increasing. While every indicator gives some information which may me deemed valuable, most are like mirrors, they only show what has happened in the past, which is why they are called lagging indicators. To use them to go forward, rarely gives an opportunity to gain better than a 50% advantage, which it is why the use of them is considered by many to be a useless, at best. The bare use of candlesticks, and a strict risk/reward strategy gains the most chances for success, but only once one learns to read the charts, and still, there is no guarantee that what is observed as speculation will manifest itself. The use of indicators is an acceptable practice, but only if viewed for what they really are, a picture of history, nothing more, nothing less.

Taking a daily chart candle and devolving it into its hourly candles is an exercise that was recommended to me to help me prove that candles sticks used for shorter TF than daily is not reliable over a longer Term. A daily. Pattern from a supply demand zone will over time create success. Recall the zones are often 150 200 pips thick so stops are necessarily larger... But time after time I have seen that trading daily zones with good PA .... Engulf with retracement second test is my favorite yields good result. Indicators can be very misleading but self fulfilling just my opinion

Thanks for your point of view and I can relate to what you have said about indicators but from a different perspective.

a) Most people do not understand that before you employ any indicator at all you first need to understand how it is calculated and what the math implies. Take the stochastic for instance which employs a growth formula of the general form (a/b -1)*100 where "a" is now and "b" is base. It is a growth function and is not lagging at all (it reads growth or decay to the moment) but it is up to you to find the context of a reading in terms of projecting possiblities into the future (at some risk for sure but depending on skill). This can be done in terms of the volatility structure it indicates at the point of reading (i.e., by the bandwidths 50/20 -----> 0 and 50/80 -----> 100). b) still staying with the example, you then judge recency (how recent did the change being reported occur) and the scale (or time frame, in other words how large a range could we project sustained behavior) and this should provide you with all you need to know about price behavior to act (clearly reading M30 price action this way does not compare with say D1 in terms of trading implications and as such your choice of interval is important). c) the point being made is most people use and see indicators wrongly in that they use them indicatively (trying to get them to tell the future) instead of analytically (telling you what gives and you then decide what to make of it). So if momentum just crossed over 50 into the 50/80 bandwidth tending (---->) 100 in D1 the indicator is merely giving similar information as a consultants report would in real estate saying the market is growing to the upside with space or time still to sustain the growth (and you act to enter or not to enter in either case at some risk).

Of course the worst thing you can then do is to second guess that reading say because some lame brained fundamental analysts writes prose to the contrary or because some immediate news releases is seen as negative when in fact the indicator is telling you that for all that and more momentum is growing positively and will sustain in range for the time ahead (for all that and more because the calculation is based on price momentum which has a memory and is not fickle such that once rendered you can depend on it 100% to be objective measure of market sentiment sustainable to the extent reported). Now most people not knowing the math and therefore the implications blink at every piece of noise and then turn round to blame indicators - that is apart from not using them analytically and just moping at them expecting them to point to the future when in fact the future is simply based on the signed rate of change of price (ROC or objectively calculated market sentiment).

Space is too tight to really explain this issue and give the angles as I would want and also to explain that the theory of market at the back of your mind in reading and trading the markets is crucial. But this admittedly crude example (not including all that neeeds to be done derive and use the ROC) I hope does provide some insight as to my meaning.

The Crow (-_-)

Good Point!

Big market, big sharks, imagine the amount of stop losses they would have to run to fill their bellies..

How did this article of October 2013 make its way to the First page of October 2014????
My Opinion : The amount should be much more.
The volumes only considers all regulated and registered brokers. There are tons of scammers and bucket shops to add to the volume.

The only indicators I use are weekly and monthly pivots and the Slow 200 MA.The rest of it is based on Purchasing Power Parity and Probability Bands.