As a result of international commodity and finished product trading activities, the currencies of the major nations of the world usually remain in demand and see active trading on the forex market.

Also, the forex market has grown considerably in size and breadth since exchange rates began to float in the modern era in the early 1970's. The following sections will describe the market and some of the factors behind this remarkable growth.

Main Centers and Currencies

Currently, approximately 60% of forex trading activity is focused in three main trading centers. Listed in order of importance in terms of transaction volume, these centers are London, New York and Tokyo.

The primary major currencies traded in those centers are the U.S. Dollar, the Euro, the Japanese Yen and the British Pound Sterling. Active secondary currencies include the Swiss Franc, the Australian Dollar, the Canadian Dollar and the New Zealand Dollar

Size and Products Traded in the Forex Market

The average daily global turnover in the forex market has been estimated to exceed $3 trillion, making the forex market the largest financial market in the world.

The daily volume broken down by forex products traded is as follows:

• Forex Swaps: $1.7 trillion

• Spot Trades: $1.0 trillion

• Forward Outrights: $0.4 trillion

• Currency Options: $0.2 trillion

Dramatic Growth of the Forex Market

Trading in the forex market has seen dramatic growth since exchange rates began to float again in the early 1970's. For example, daily forex market turnover in the following years was estimated at:

• 1977: $5 billion

• 1987: $600 billion

• 1992: $1 trillion

• 2000: $1.5 trillion

• 2007: $3 trillion

Forex Growth Factors

A number of factors have influenced the sharp growth in forex trading activity seen over recent years. They include:

• Volatility - changes in exchange rates and interest rates have increased in size and frequency, thereby increasing opportunities for traders.

• Globalization - International trade of finished products and commodities has grown dramatically in recent decades, as companies now shop in a global marketplace for the goods and services they require. The more that international trade increases, the greater the need for foreign exchange to settle such transactions.

• Risk Awareness - companies from around the globe are increasingly aware of how adverse forex moves can affect their overall profitability. This has increased the demand for forex hedging products like forwards and currency options.

• International Investment - Investors are increasingly looking abroad for better yields, as well as currency appreciation opportunities.

• Information Access - The modern era has dramatically improved access to market information, timely news and other fundamental analysis tools.

• Better Communication - Also, the Internet has made forex trading much more accessible for individual traders.

• Greater Computing Power - Advances in computing technology applied to automated trading systems and electronic trade processing have made it possible to execute a larger number of forex deals faster and more reliably. Also, the use of computers for risk management and technical analysis software has greatly improved the speed sophistication of the trade analysis process.

Overall, the forex market offers many advantages for the personal and institutional trader alike.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.