In the foreign exchange markets there is little or no 'inside information'. Rate
fluctuations are usually to do with world economy or the national economies so
significant news is released publicly so, at least in theory, everyone in the
world receives the same news at the same time. This is in contrast to the equity
market where a stock may lose value by 5% or more, and only later do the reasons
for this become apparent when a newspaper reports that forecasts for that
company have been revised downward, or that a key executive has resigned (this
is why insider trading in stock markets can be a problem).
Big foreign exchange trading centres are located in New York, Tokyo, London,
Hong Kong, Singapore, Paris and Frankfurt amongst others and the foreign
exchange market is open 24 hours per day throughout the week (closing worldwide
Friday afternoon and reopening Sunday afternoon). If the European Market is
closed the Asian Market or US will be open on the other and so all world
currencies can be continually in trade. Traders can react to news when it
breaks, rather than waiting for the market to open, as is the case with most
other markets. This enables traders to take positions anticipating the impact on
the exchange rate of important news items.
In the foreign exchange markets there is never a 'bear' market. Currencies
are traded in pairs; every trade involves the selling of one currency and the
buying of another. If some currencies are going down, others must be going up.
Scale
Average daily international foreign exchange
trading volume reached $1.9 trillion in April of 2004 according to the September
29 2004 issue of the Wall Street Journal.
