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How is the Forex Turnover calculated?

Discussion in 'General Forex Talk' started by f-man, Dec 18, 2010.

  1. f-man

    f-man 4Xangels Representative

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    This magic number $3.980.000.000.000,00 was written as the latest estimation of Forex Turnover per day!!!

    It's a couple of sizes too big compared with anything else on this planet, but how is it calculated?

    I personally believe that it is not the actual amount of money really dealed, but there are the following points to take into consideration:

    1. How many transactions are taken into account?

    You place an order. it means You Buy and your Broker Sells
    You close the order, it means You Sell and your Broker Buys

    There are total 4 transactions for 1 trade!
    If they count everything, then you need to divide it by four to get the actual amount of invested money in the trade.

    2. The leverage

    Most retail Forex is made with a 50+ leverage. Of course I think the institutions who manage large scale accounts do not use such leverage, which menas the absolute average leverager is a number between 10-40.

    If they count the amount of the leveraged transaction (which I believe they do) then we have to divide the amount by the absolute average leverage.


    Does anybody know?
     
  2. Pharaoh

    Pharaoh Colonel

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    I'm pretty sure it's mostly a wild over-estimate that's very loosely based on the totals of ALL currency exchange transactions. These include banks and company moving money from one currency to another to settle accounts, currency futures, institutional forex, retail forex, and commercial money-changers.

    Yeah, they are probably counting the leverage and also I think your point about a single closed transaction being counted 4 times is probably correct too.

    Retail forex can only really tap into a modest portion of all this claimed liquidity. The bulk if it is money moving between banks. Some of that is between branches of the same bank in different countries.
     
  3. f-man

    f-man 4Xangels Representative

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    I am glad that the King agrees with me
     

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