ABOUT THE FOREX MARKET

The FOREX market is the most liquid market in the world. With a daily trade volume of approximately $2 trillion a day it dwarfs most other markets. What this means for the trader is unsurpassed liquidity and excellent trade execution

The FOREX is based on the electronic inter-bank system where banks, corporations, governments, institutional investors and speculators all meet to exchange foreign currency. It has no physical or central location and follows the sun spanning one time zone to another across the major global financial centers. This gives it a great advantage for the entrepreneur over other financial markets… immense liquidity 24 hours a day, 6 days a week. 

HISTORY

For the speculator, currency trading has grown exponentially when online trading platforms began to emerge making it easy for the retail investor to enter this incredible market. Average daily global turnover in traditional foreign exchange market transactions totalled $2.7 trillion in April 2006 according to IFSL estimates based on semi-annual London, New York, Tokyo and Singapore Foreign Exchange Committee data. Overall turnover, including non-traditional foreign exchange derivatives and products traded on exchanges, averaged around $2.9 trillion a day. This was more than ten times the size of the combined daily turnover on all the world's equity markets. Foreign exchange trading increased by 38% between April 2005 and April 2006 and has more than doubled since 2001.

It can be argued that currency trading as we know it today started with the Bretton Woods Agreements of July 1944 at the United Nations Monetary and Financial Conference. 44 allied nations gathered and established rules for international monetary management. During the conference the International Monetary Fund (IMF) was created, the International Bank for Reconstruction and Development (IBRD) was established, and a currency regime was put in place. In essence, it obligated each country to maintain their exchange rate within a fixed value – plus or minus one percent – in terms of gold. The United States agreed to link the USD to gold at $35 per ounce and became the principal “reserve currency”. It took over the role that gold played under the gold standard becoming the standard to which other currencies were pegged, and effectively became the world currency.

The system was very beneficial for the United States but, became unsustainable as internal pressures and the world economies grew and evolved. In 1971 the United States went off the gold standard effectively ending the Bretton Woods system and beginning the free floating currencies which we trade today.

CONTINUE... TO THE BASICS OF THE FOREX MARKET

 

* Some information is compiled from public sources and believed to be reliable but is not guaranteed as to its accuracy or completeness. No responsibility is assumed for the use of this material and no express or implied warranties are made. Nothing contained herein shall be construed as an offer to buy/sell, or as a solicitation to buy/sell, any security, commodity or derivatives instrument. Instruments such as Futures, Forex, Options, and CFD trading involve a substantial risk of loss and is not suitable for all investors. Please carefully consider your financial condition prior to making any investments.

** Without proper risk management, this high degree of leverage can lead to large losses as well as gains.