If you have ever traveled outside the United States, you have probably traded in a foreign currency. Every time you travel outside your home country, you have to exchange your country’s currency for the currency used in the country you are visiting. That’s why it is very important that you should know the exchange rate of various currencies used in the world. By this way, the average tourist uses foreign currency exchange. On the other hand, foreign currency traders trade much larger sums of money thousands of times a day.
The majority of trades take place in three main centers of currency trading- the United States, United Kingdom and Japan. The rest of the trading takes place primarily in Singapore, Switzerland, Hong Kong, France, Germany and Australia. The United Kingdom manages the largest share. The United States is second, followed by Japan.
FX currency trading is ongoing 24 hours a day, with some countries just getting started, as others are finishing up their business day. For example, when the trading day opens at 8 a.m. in London, the trading day is ending for Singapore and Hong Kong. When New York opens its trading doors, it’s already 1 p.m. in London. Thus, traders must be alert around the clock, because a major event at an off hour anywhere in the world can shake the markets at any time.
Individual trades in the range of $200 million to $500 million are not uncommon. In fact, the US Federal Reserve estimates that approximately $1.5 trillion dollars are traded every day, and that represents more than $200 every business day of the year for every man, woman and child living on the planet. That’s several times the daily turnover in US government securities, which is the world’s second-largest market. In fact, estimates indicate that quoted price changes occur as frequently as 20 times per minute, and the most active currency rates can change as many as 18,000 times in a single day according to the federal reserve.