How Much Volume Is Generated in the Forex Market Daily (You’ll NEVER Guess)

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Do you ever wonder just how much volume is generated in the forex market each day?

If you want to know the answer to this question, then read on.

We have listed down how much volume is generated in the forex market each day in the currency pairs traded.

You’ll never guess how much volume is generated in the forex market each day.

Let’s start counting…

How Much Volume Is Generated in the Forex Market Daily

The volume of the Forex market is roughly $6.6 Trillion per day. A significant portion of this volume comes from automated trading programs and commercial trading while the remainder comes from traders.

(Source: Triennial Central Bank Survey of Foreign Exchange and Over-the-counter (OTC) Derivatives Markets in 2019)

As you can see it’s a tremendous amount of trading that takes place.

In fact, the UK produces the most volume at a total of $3.6 trillion per day.

How Does the Volume Generated in Forex Compare To Other Assets?

Let’s put things into perspective on how huge the volume generated in forex is compared to other assets that are traded each day.

Bonds

Bonds are the second largest in terms of volume generated daily.

Not stocks, as most would think.

In fact, as of 2018 over $500 bn in US treasuries ALONE were traded (source: Statista).

Stocks

The stock market, along with the oil market, is one of the largest contributors to world GDP.

Stocks are a key part of the financial system, and are also used to finance companies in a variety of sectors, including manufacturing and services.

Stocks globally trade around $250 bn per day as of 2021. (Source: World Bank)

Who Trades The Most Volume In the Forex Market Daily

The forex market is the most active market in the world and there are multiple factors that drive its activity.

Some of the key players include central banks, banks, investors, corporations, brokers, and retail forex traders.

In general, the big banks, hedge funds and large investment firms trade the most volume in the forex market daily.

This is because they have deep pockets, and can afford the commissions on the trades they execute.

Smaller banks and retail investors trade a smaller amount of volume in the forex market.

These investors often choose to do the bulk of their trading using the leveraged products offered by online forex brokers.

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1. Commercial and Investment Banks

The greatest volume of currency is traded in the interbank market.

Banks of all sizes trade currency with each other, and they have electronic networks that let them communicate.

Many big banks hold the majority of the world’s currency in reserves.

Forex traders use banks to perform foreign currency transactions for clients and conduct their own speculative trading from their own trading desk.

When banks act as dealers for their clients, the bid-ask spread represents the bank’s profits.

When it comes to speculative trading, currency pairs are traded to profit from fluctuating currency values.

In a nutshell, banks act as dealers for their clients.

They will buy and sell currency on the open market.

When they do this, they can make a profit by charging a fee for their services.

This is known as the bid-ask spread.

Banks can also speculate on the future value of a currency.

They will do this by buying and selling currency in the open market.

2. Central Banks

Central banks are the most important players in the forex market. They are extremely important to the market as they are responsible for controlling the money supply and inflation.

Central banks play an important role in influencing the rates of many foreign currencies and their monetary policies have direct implications for the exchange rate, which is why it is vital for traders to know about it.

Central banks are responsible for setting the prices of their national currencies on the forex market.

This is the exchange rate regime used by its government. It trades at par in the open market.

Floating exchange rates are the most popular type of currency used by global trade today. A floating rate allows a currency to appreciate or depreciate in relation to other currencies. A fixed-rate has a fixed exchange rate.

Any action taken by a central bank in the forex market is done to stabilize or increase the competitiveness of that nation’s economy.

There are two possible outcomes: The central bank can intervene, making its currency appreciate, or it can choose to let the currency depreciate.

A central bank might weaken its own currency by creating additional supply during periods of long deflationary trends, which is then used to purchase foreign currency.

By reducing the exchange rate, the Fed weakens the domestic currency, making exports more competitive in the global market.

Central banks use various strategies to lower interest rates to help curb inflation.

Their trading so often also serves as a long-term indicator for forex traders.

3. Investment Managers and Hedge Funds

The second biggest collection of players in the forex market is portfolio managers, pooled funds, and hedge funds.

Currency traders who manage large accounts such as pension funds, foundations, and endowments invest their client’s money in currencies.

An investment manager that deals internationally will buy and sell currency to manage their portfolio.

Investment managers may also make speculative currency trades, and some hedge funds execute speculative currency trades as part of their investment strategies.

4. Multinational Corporations

Companies engaged in the importation and exportation of foreign currencies carry out forex transactions to finance their activities.

Some companies trade forex to hedge the risk associated with foreign currency translations.

Currency risk can add a level of safety to offshore investments, but hedging against it can increase your costs. 

5. Individual Investors

The volume of forex trading by retail investors is much lower than that of financial institutions or companies.

To Wrap It All up

The Forex market can generate over $6.6 trillion of trades per day, which is an insane trading volume over a 24-hour period.

So while many people think of stocks and futures as the main focus of trading, a large part of the Forex market is traded by retail investors who want to make a quick buck off the foreign exchange rate.

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