With the globalization of the economy, economic activities among countries, including trade, tourism, consumption, and various asset investments, are becoming more and more frequent. In the process, currency swaps are naturally generated. The foreign exchange market (Forex / FX) is a financial market that handles currency transactions in a decentralized form all over the world.

 

There is no physical market in the foreign exchange market, and most transactions are conducted in the so-called over-the-counter market. With the popularization of communication networks, transactions are no longer restricted by time and distance. The development of technology has also made foreign exchange transactions electronic, providing the foreign exchange market with great flexibility and low transaction costs. Therefore, there is almost no threshold to participate in foreign exchange transactions.

 

Participants in the foreign exchange market include central banks, governments, investment banks, commercial banks, funds, financial institutions, major companies, importers and exporters, speculators, ordinary investors, etc. Therefore, the trading volume is quite huge, and the foreign exchange market is also the world's largest market with the highest trading volume and the strongest liquidity. According to a survey conducted every three years by the Bank for International Settlements (BIS), in April 2019, the average daily trading volume of the global foreign exchange market was US$6.6 trillion, a sharp increase of nearly 30% from US$5.1 trillion in 2016. The main purpose of participating in the foreign exchange market, in addition to the most basic promotion of international trade and investment, also includes speculation and arbitrage transactions.

  

Can the foreign exchange market be traded 24 hours a day?

 

The development of technology has eliminated the limitations of time and distance. In addition, the major financial centers in different places are located in different places, so the time difference is different. Every day, from Sydney to Tokyo, Hong Kong and Singapore, and then from Frankfurt to London and New York, the markets in various places operate independently and are closely connected. When the Asian trading session ends, the European trading session begins, followed by the North American trading session, and then back to the Asian session. Therefore, the foreign exchange market centered on over-the-counter trading has become a place for 24-hour trading five days a week. Only when it encounters weekends and major holidays in various countries, the foreign exchange trading time will be adjusted.

Further reading: How to choose the best trading time in the foreign exchange market? (with global market trading schedule)

 

In addition, 24-hour foreign exchange trading has become more popular due to the rise of retail foreign exchange brokers and online foreign exchange trading platforms since 2000. Foreign exchange brokers have lowered the entry threshold, allowing more small-scale traders around the world to connect with the global foreign exchange market through brokers' platforms. In addition to making foreign exchange trading more active and providing sufficient liquidity, it also makes the entire foreign exchange ecosystem more complete.