Foreign Exchange Trading

Foreign exchange trading is generally conducted in a decentralized manner,with the exceptions of currency futures and options. Foreign exchange hasexperienced spectacular growth in volume ever since currencies were allowed tofloat freely against each other. While the daily turnover in 1977 was U.S. $5billion, it increased to U.S. $600 billion in 1987, reached the U.S. $1 trillion markin September 1992, and stabilized at around $1,5 trillion by the year 2000.Main factors influence on this spectacular growth in volume are indicatedbelow.For foreign exchange, currency volatility is a prime factor in the growthof volume. In fact, volatility is a sine qua non condition for trading. The onlyinstruments that may be profitable under conditions of low volatility arecurrency options.