what is market size

The main purpose of calculating size


2021-04-27 19:17:58

The main purpose of calculating size of the market is to identify and verify the existence of a problem as well as a sufficient number of customers who are willing to pay for its solution. In other words, you need to make sure that you can earn money in this market and it is enough to ensure that a company has room for growth in the coming years. So what is market size? It is a measurement of the total volume of a given market. And also it could be viewed as the number of individuals in a certain market who are potential buyers and/or sellers of a product or service. 

Market evaluation is a more creative process than accurate and consistent. It will be close to reality to a certain extent as far as you can operate with extensive knowledge and how well you understand it. Perhaps there is no correct answer. But do not despair if you find a smaller market than you anticipated. The market size is rarely the main determinant in the long run since you can find benefits anywhere or discover a new segment. An investor looks at the market as the maximum possible income. In relation to the question of the market size, an investor faces at least two risks: the market is very small and the market is overvalued. 

Here is a brief description of each type of market size. 

Such a large financial organization as the Bank for International Settlements (established to facilitate cooperation between central banks of different countries and is the center of economic research) conducts a comprehensive Forex study every three years (since 1989). According to the data published by this organization, the daily turnover in the largest currency market in 2000 was $1.5 trillion, in 2010 - $4 trillion, and by 2020 it is projected to increase to $10 trillion. So, it is clear that the Forex market size is not small by any means but it seems even larger in comparison to the securities market, which in 2010 added up to about $300 billion. As for other types of market, by 2025, as crypto payment networks mature, and consumers, as well as businesses, gain trust in cryptocurrencies, the total value of all cryptocurrencies required for payments and store of value is projected to grow from $16 billion in 2017 to $1,132 billion in 2025, that is a Cryptocurrency market size increase of 7,000% or a compound annual growth rate of approximately 70-80%. 

There are many methods for calculating market size but experience shows that, firstly, a fairly narrow number of methods are used in practice, and secondly, there is no universal method of calculating it for any market or segment - each field needs an individual approach. It should also be noted that market size is a calculated or predicted value and therefore may have inaccuracies. This value is calculated on the basis of certain assumptions and generalizations of various facts that took place in the past and not in the future. At the same time, the calculation of the market displays figures which are close to reality and which can and should be used in making strategic decisions.  


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