Forex Market: Unlocking Opportunities for Investors
In 2019, the global foreign exchange market (forex) was valued at a jaw-dropping $2.4 quadrillion.
In fact, this is equal to more than 50 times China, Japan, Germany, India and the U.S.’s economic output combined. Institutional investors, such as investment banks, pension funds, and large corporations have typically dominated this space, but there are avenues for individuals to enter the market as well.
This infographic from Compare Forex Brokers breaks down the world’s most interconnected financial market, and how individual investors can start trading.
The Forex Market: A Global Landscape
Across the forex market, 170 major, minor, and exotic currency pairs can be traded as contracts for difference (CFDs). A CFD enables you to speculate on whether the price of an asset will rise or fall.
Here, trades are conducted on over the counter (OTC) markets—non-centralized markets made up of a network of participants. This is different from traditional markets, such as the S&P 500 and the Nasdaq, which operate on formal, centralized exchanges.
While the forex market is by nature, decentralized, these core regions show where forex transactions are most concentrated by market participants including banks, commercial businesses, or individual investors.
Globally, the majority of forex trading takes place within the following hubs.
|Forex Trading Centers (2019)||Country||Share of Global Over the Counter (OTC) Forex Turnover|
The UK accounts for over 43% of global forex trading, averaging $2.7 trillion daily according to the 2019 Triennial Central Bank Survey by the Bank for International Settlements. London’s geographic location between the U.S. and Asia makes it an optimal forex trading centre—a trend that has held strong over the last 50 years.
With forex trading in the U.S. jumping over 50% in the last decade, the U.S. is the next most active forex market. Meanwhile, averaging $633 billion in trading volumes in 2019, Singapore is Asia’s largest forex trading center, with Hong Kong following close behind.
The Top Seven Currency Pairs
What are the most highly-traded currency pairs?
Overall, 68% of global forex trading falls into seven major currency pairs.
|Top Seven Currency Pairs||Percentage of Total|
|1||United States Dollar vs Euro||24.0%|
|2||United States Dollar vs Japanese Yen||17.8%|
|3||United States Dollar vs Great British Pound||9.3%|
|4||United States Dollar vs Australian Dollar||5.2%|
|5||United States Dollar vs Canadian Dollar||4.3%|
|6||United States Dollar vs Chinese Yuan||3.8%|
|7||United States Dollar vs Swiss Franc||3.6%|
Currency prices are impacted by factors including inflation, international trade, political stability, among other macroeconomic factors.
Breaking Down Institutional and Retail Trading
While commercial and central banks, hedge funds, and investment managers make up most of the forex market, only 5.5% are individual investors.
Importantly, they differ in a few key ways.
|Institutional Forex Trading||Retail Forex Trading|
|- Buy and sell the physical currency|
- Interdealer market: Large institutions trade on an interdealer market, which is a non-centralized network of dealers
- Less formal: Often trades are conducted by phone, email or instant message.
- Non-transparent: Execution prices and buy/sell orders are not visible to the market.
|- Buy and sell contracts for difference (CFD)
- Contracts for Difference (CFD): CFDs allow traders to speculate on the price of an underlying asset. Traders do not own the underlying asset.
- Long and Short Trades: Traders can take a long or short position:
- Long position: buying a CFD with the expectation the asset's market price will increase.
- Short position: selling a CFD with the expectation the asset's market price will decrease.
For various reasons, retail forex trading increases in popularity year after year. However, before diving in, it is important to know the stakes involved in this speculative market.
Understanding the High Risk of Forex Trading
Retail forex trading is, at is core, very risky.
In 2019, 71% of all retail forex trades lost money. One explanation is the highly leveraged nature of the market—many investors trade using borrowed money. But while trading with leverage can magnify losses, it also applies to gains.
Key Benefits of the Forex Market
While there is risk inherent in the market, what are some of the advantages in forex trading?
- Low transaction costs: No exchange or regulatory fees. Overall trading costs are low with both commission and no commission pricing structures available.
- High liquidity: Along with being the largest market globally, it is also the most liquid with $6.6 trillion in daily trading volume.
- 24-hour market: Trading is not confined to limited hours or time zones.
- Leverage: Forex brokers offer retail traders leverage which allows the to increase their exposure
Unlike equities, currency trading is all about relativity. A currency can depreciate overall, but can also appreciate relative to a currency that has depreciated even more.
Connect to New Markets
While big gains are possible, many trades lose money, but regulatory improvements have helped build trust in the market.
Meanwhile, multiple digital platforms provide a link to global currencies, allowing retail forex traders to enter the market and trade from any location. For those comfortable taking more risk, currency markets offer opportunities with outsized potential.
More Than Precious: Silver’s Role in the New Energy Era (Part 3 of 3)
Long known as a precious metal, silver in solar and EV technologies will redefine its role and importance to a greener economy.
Silver’s Role in the New Energy Era (Part 3 of 3)
Silver is one of the first metals that humans discovered and used. Its extensive use throughout history has linked its name to its monetary value. However, as we have advanced technologically, so have our uses for silver. In the future, silver will see a surge in demand from solar and electric vehicle (EV) technologies.
Part 3 of the Silver Series comes to us from Endeavour Silver, and it outlines silver’s role in the new energy era and how it is more than just a precious metal.
A Sterling Reputation: Silver’s History in Technologies
Silver along with gold, copper, lead and iron, was one of the first metals known to humankind. Archaeologists have uncovered silver coins and objects dating from before 4,000 BC in Greece and Turkey. Since then, governments and jewelers embraced its properties to mint currency and craft jewelry.
This historical association between silver and money is recorded across multiple languages. The word silver itself comes from the Anglo-Saxon language, seolfor, which itself comes from ancient Germanic silabar.
Silver’s chemical symbol, “Ag”, is an abbreviation of the Latin word for silver, argentum. The Latin word originates from argunas, a Sanskrit word which means shining. The French use argent as the word for money and silver. Romans bankers and silver traders carried the name argentarius.
While silver’s monetary meanings still stand today, there have been hints of its use beyond money throughout history. For centuries, many cultures used silver containers and wares to store wine, water, and food to prevent spoilage.
During bouts of bubonic plague in Europe, children of wealthy families sucked on silver spoons to preserve their health, which gave birth to the phrase “born with a silver spoon in your mouth.”
Medieval doctors invented silver nitrate used to treat ulcers and burns, a practice that continues to this day. In the 1900s, silver found further application in healthcare. Doctors used to administer eye drops containing silver to newborns in the United States. During World War I, combat medics, doctors, and nurses would apply silver sutures to cover deep wounds.
Silver’s shimmer also made an important material in photography up until the 1970s. Silver’s reflectivity of light made it popular in mirror and building windows.
Now, a new era is rediscovering silver’s properties for the next generation of technology, making the metal more than precious.
Silver in the New Energy Era: Solar and EVs
Silver’s shimmering qualities foreshadowed its use in renewable technologies. Among all metals, silver has the highest electrical conductivity, making it an ideal metal for use in solar cells and the electronic components of electric vehicles.
Silver in Solar Photovoltaics
Conductive layers of silver paste within the cells of a solar photovoltaic (PV) cell help to conduct the electricity within the cell. When light strikes a PV, the conductors absorb the energy and electrons are set free.
Silver’s conductivity carries and stores the free electrons efficiently, maximizing the energy output of a solar cell. According to one study from the University of Kent, a typical solar panel can contain as much as 20 grams of silver.
As the world adopts solar photovoltaics, silver could see dramatic demand coming from this form of renewable energy.
Silver in Electric Vehicles
Silver’s conductivity and corrosion resistance makes its use in electronics critical, and electric vehicles are no exception. Virtually every electrical connection in a vehicle uses silver.
Silver is a critical material in the automotive sector, which uses over 55 million ounces of the metal annually. Auto manufacturers apply silver to the electrical contacts in powered seats and windows and other automotive electronics to improve conductivity.
A Silver Intensive Future
A green future will require metals and will redefine the role for many of them. Silver is no exception. Long known as a precious metal, silver also has industrial applications metal for an eco-friendly future.
Visualizing All the Known Copper in the World
Are we running out of copper? This graphic from Trilogy Metals paints a clear picture of all the copper in the world, above and underground.
Visualizing All the Known Copper in the World
Copper has many important applications in the modern economy. From smartphones and cars, to homes and hospitals, we use the metal almost everywhere, especially with renewable energy.
Often, consumers take for granted the accessibility to modern technology without the thought of where the materials come from or their impact on the environment. The world and its resources are finite and confined by both geography and the technology used to extract resources.
As governments and economies struggle to achieve a sustainable balance between humanity’s material impact and the health of the planet, knowing the availability of resources will become a critical pivot for achieving and maintaining that balance.
Copper is one such resource—and today’s graphic from Trilogy Metals outlines all the copper ever mined and what known resources still exist on Earth.
Are we running out of copper?
Above Ground Copper Resources
The production of mined copper has increased dramatically over the last two decades, From 9.8 million metric tons in 1995 to 20 million metric tons in 2019, a 104% rise over 25 years.
A total of 700 million metric tons of copper have been mined throughout history. Based on the 2019 average price of $6,042/metric ton, that’s worth $4.2 trillion—more than the value of Apple and Amazon combined.
Chile has been the source of the majority of the world’s copper and the biggest copper mining nation. Together, Chile, Peru, and China account for 48% of current global copper production.
|Ranking||Country||Mine Production 2019 (Ktons)||Country||Reserves 2019 (Ktons)|
|Other Countries||3,800||Other Countries||220,000|
|World Total||20,000||World Total||870,000|
As we enter the era of renewable energy, electric vehicles, and see more global economic growth, the demand for copper will continue to rise. In fact, the Copper Alliance projects an increase of 50% in just the next 20 years.
Are We Running Out of Copper? Not So Soon
Although a large chunk of the Earth’s copper is already above ground, there’s still more to mine.
According to the USGS, identified copper resources amount to 2.1 billion metric tons, with a further 3.5 billion metric tons in undiscovered resources.
At current production rates, it would take about 105 years for us to use all of it and this does not even account for recycling or new discoveries. Copper is 100% recyclable, and nearly all of the 700 million metric tons of mined copper is still in circulation. With this in mind, it’s safe to say that we won’t be running out of copper anytime soon.
Despite copper’s apparent abundance, the red metal is expensive to actually get out of the ground. As a result, the supply of copper has often fallen short in meeting its rising demand. This, in addition to falling resource grades in Chile, the largest producer of copper, emphasizes the need for new discoveries and mines.
While there are known reserves of copper above the ground, the Earth remains largely unexplored because of the inability to explore for minerals in the depths of the oceans and other planets. As the readily available supply of copper becomes scarce, the incentive to mine currently uneconomic copper increases.
A Mineral Intense Future
Most consumers take the immediate availability of materials such as copper and other metals for granted, with little thought about whether there is enough.
But it’s important to remember that these materials are as finite as the dimensions of the Earth. In this material world, understanding what is and what is not available is critical for a sustainable future here on Earth.
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