Currency Market Speculation

Most of the trading volume in the currency market is based on speculation.While there are commercial and financial transactions, speculation is a major part of the money that moves through this financial market each day. In fact, almost two trillion dollars of speculation trading occurs each day in the currency market.

It would make sense to understand what speculation is. Speculation is where traders buy and sell based on the current information and price fluctuations. These traders do it for short-term gains, and often base their decisions on minute-to-minute, or hour-to-hour price fluctuations. These traders make their investments based on paying attention to global trends and news, and according to the best places to trade in order to turn a profit.

The currency market is the largest financial market in the whole world. It is larger than all of the world's stock markets combined. Understanding the currency market, the size, the scope, the trading styles, etc. is key to speculating well in the market.

It is estimated that 90% of the daily trading volume in the world's largest market is derived from speculation. By default, this means that only about 10% of the daily global volume is based on commercial or investment trades. This is a lot of speculation. What does this mean? It means that there is a huge volume of trades going on, and even large trades will not impact price very much. This means that the currency market is a very liquid market, which means it is a great market to speculate in. The liquidity is great for those that need practice, as changes in the market do not occur so rapidly, and the market is not thin, which means that you have a greater ability to buy and sell security.

When it comes to speculation, the most common currency trading is made up of "major currencies" which represent the most developed economies, such as the US Dollar, the Japanese Yen, the Euro, etc. The majority of speculation takes place with the major pairs. In addition to the major currency pairs, most speculation occurs in specific currency bloc basis. The bulk of trading takes place between the USB bloc (US), JPY bloc (Japan), and the EUR bloc (Euros).These are the three largest global economic regions, with the Euro bloc making up more than 50% of the trade volume, the US bloc about 22%.

Trading in the currency market and speculating in the currency market requires a basic understanding of the scope and size, the various trading strategies, etc. Be sure that as you begin trading within the currency market, and speculating, that you pay attention to global trends, that you understand the major currency pairs, and that you choose a strategy that allows you to go short, long, or square, according to the market trends, the liquidity of the market, etc. Good luck speculating.