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Display other important topics of the moment among different types of news and forex analysis. The latest currency exchange rates of all major world currencies. All website times are in UK Time. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Peter from Ireland wrote in asking me to do a piece on liquidity on the forex market.
Although the market trades 5 trillion dollars per day in volume, even forex traders face limitations in how much volume they can push through in a short period of time. A Zero Hedge article on the Reuters 3000 platform outage cited some interesting statistics for the currency markets and where the trading actually occurs. That’s an astronomical amount of money. Intuition makes it feel like hitting the ceiling on executing large transactions might be a problem for only the biggest institutions. Let’s take a look at where we might expect to run into problems. That number does not imply how much volume occurs in the specific EURUSD pair. Also, that that was seven years ago.
I dug around looking for more up to date numbers. Forex trading volume is notoriously hard to track due to it being an over the counter market. The best proxy that I know of is the FX futures market. I used to estimate the proportion of the EURUSD pair in relation to all traded volume. FX futures contracts, like their spot counterparts, are all denominated in different currencies. The average trading consists of 1,440 minutes per day.
Again, this is a huge number. Everyone in forex trades on margin. Institutions traditionally keep their margin very low. Assume that 3:1 is the norm for the big players. That’s a lot of money, but that is chump change by institutional standards. That’s more on par with a wet behind the ears CTA that launched within the past few years. Dropping down to the retail scenario, the numbers involved get much, much smaller.