The forex market is the biggest and most liquid financial market in the world. It is a multi-trillion-dollar market… yes you read that right! According to the Bank for International Settlements triennial report of 2016, the foreign exchange market cap averaged $5.1 trillion per day.
The forex market is considered an Over-the-Counter (OTC), or “interbank” market due to the fact that it doesn’t have a specific location or a central exchange and no strict rules or regulations.
Forex is traded electronically (majorly via the internet) all over the world within a network of banks which makes it accessible to a plethora of interested persons and organizations, who can trade with ease 24 hours a day, five and a half days a week.
This simply means that anyone with the requisite knowledge can trade on forex from any part of the world, as long as you have an internet connection.
The efficiency of the Forex market is unrivaled by other financial market as its liquidity makes it easy for traders to buy and sell currencies without hassles or delay, and it enables huge trading volumes to happen with very little influence on price fixing.
Forex traders including individuals and organizations decide on whom they want to trade with depending on trading conditions, the attractiveness of prices, and the reputation of the trading counter party. However, the American dollar is the most traded currency, having 84.9% of all transactions.
The euro’s share is second at 39.1%, while that of the yen is third at 19.0%. The most traded currency pairs are the EUR/USD and USD/JPY, they account for approximately 41% of all forex trades annually.
The chart below shows seven of the most-traded currencies:
Below is a list of the top 10 most traded currencies:
THE FOREX MARKET AND THE DOLLAR
The US dollar remains a significant part of the forex market and the world at large, as almost every international transactions made is financed using the dollar. According to the International Monetary Fund (IMF), the U.S. dollar comprises roughly 64% of the world’s official foreign exchange reserves
The dollar more often makes up a part of all major currency pairs. The United States has the largest and most liquid financial markets in the world and her economy / currency is quite stable. Some of these factors contributed hugely to the popularity of the dollars among forex traders.