The Foreign Exchange market, also referred to as the "FOREX" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. In comparison, the daily volume of the New York Stock Exchange is approximately US$30 billion per day.
Until now, professional traders from major international commercial and investment banks have dominated the FOREX market. Other market participants range from large multinational corporations, global money managers, registered dealers, international money brokers, and futures and options traders, to private speculators.
There are three main reasons to participate in the FOREX market.
One is to facilitate an actual transaction, whereby international corporations convert profits made in foreign currencies into their domestic currency. Corporate treasurers and money managers also enter the FOREX market in order to hedge against unwanted exposure to future price movements in the currency market. The third and more popular reason is speculation for profit.
In fact, today it is estimated that less than 5% of all trading on the FOREX market is actually facilitating a true commercial transaction.
