Forex on the Rise

Forex trading continues to grow. Two separate reports show that the volume of forex trading is on the rise. This goes hand in hand with the evolution of the industry.

According to the Bank of International Settlements, the daily volume of forex trading reached 4.1 trillion US dollars a day. This report is published only once every three years and is very important:

This 28% growth rate since 2007 is partly due to the credit crisis. As the world stock markets collapsed in the fall of 2008, forex became more popular. In forex trading, there is always a currency that goes up, and people found it attractive, together with the higher volatility.

Also fund managers find currency trading to be attractive, and they have diversified their investments in favor of forex in recent years. In his report about BIS release, Adam Kritzer analyzes the reasons and also comments about the implications:

I think it means that volatility will probably remain high. Investors will continue to adjust their exposure for hedging purposes, and traders will churn their portfolios in the search for quick profits.

Another report comes from the Foreign Exchange Committee, with a different resolution, and a focus on North America. In its Survey of North American Foreign Exchange Volume, the committee shows that the volume rose by 11.8% in April compared to October 2009, and is almost back to the peak levels seen at the height of the crisis in October 2008.

In his analysis of this report, Michael Greenberg brings more figures.  After reaching the aforementioned peak in October 2008, volume fell in April 2009, but resumed a steady uptrend afterwards.

The growth of forex trading goes together with more tools available for traders – better software, forex social sites and also tighter regulation, such as the recent leverage limit in Japan, and the proposed leverage limit in the US by the CFTC.

All in all, forex trading is marching towards the mainstream. For further reading,  here’s a series of 5 articles about the road that forex trading needs to take towards the mainstream. Here’s the most recent article, about finding the best forex trader. The other articles are linked from there.