what is forex: what is forex

what is forex

The History of Forex

Countries have always traded with one another, but with the advent of the 1875 Gold Standards Monetary System was the start of a whole new face of the foreign exchange market. When countries started to add a valuation to their currency which was equal to that of an ounce of gold, then variance of gold prices between two separate currencies became the infant of currency exchange, to what it is now today.

With the breakout of the first World War, there was a major fallout in the gold trading market and the standard of gold due to the majority of Europe not having the gold to exchange for the finance required from each separate country to provide power to their military. Although it continued to drop in and out of circulation between the first and second World War, by the time the second began it had pretty much dropped out of common use, despite gold still retaining it’s ranking as the best form of financial trade.

However, in 1944, the U.S. Dollar became the primary standard of currency reserves, replacing gold due to the Bretton Woods System, and this in turn meant that only the US Dollar would be backed up by gold reserves – this lasted until 1971 when the US Government stopped the exchange of U.S. Dollars for Gold held in a foreign countries deposits, thus ending the Bretton Woods System. This was to be the birth of exchange rates, beginning in 1976, though it never reached the levels it did now with electronic trading not being possible until the 90s.

What is Forex used for?

Forex – foreign exchange – is when two people agree to trade currencies. One pays for the other type of currency in another type of currency, to the tune of the same amount in that currency, this allows people to easily trade currency between each other and to have a global market they can tap into to do just this. There are various companies that play the role of being the hub of Forex between a huge variety of different people – both buyers and sellers – any time during the working week. Forex markets are the ones who dictate the value of one currency in comparison to another currency.

This allows businesses the opportunity to convert their money into another type of money – currency trading. This is used by people who want to buy goods from abroad, and pay for them using the currency of that country. Another key factor of the Forex market is to buy a currency that is doing well with money from a less fortunate currency, and reaping the benefits of the better interest rates on the better currency, thus making a nice profit after the transaction over time.

Forex benefits people from countless walks of life, like those who are constantly on the move and need to do their trading from mobile locations at any time – due to the ease of accessing a Forex facility online, it is very easy to work on the foreign exchange market from anywhere.

People who want to make money on top of their own job – due to the 24/5 (Forex tends to not happen on weekends) nature of the foreign exchange market, you can work on it at any time, specifically after work in this example, also benefit from the flexibility of the Forex market.

Also, The trading volume is massive, this allows you to move in and out of currencies without any real risk to yourself, and you can make moves on your own terms. There is also less to worry about and give consideration to when trading with Forex, whereas when dealing with shares and stocks, you can find yourself in a very dangerous position if you do not know what you are getting into. It’s also very easy to get involved in Forex, with the startup cost and the ease of use making it simple for anybody to try their hand in at the foreign exchange market.

Who uses the Forex markets?

Pretty much anybody who has money! Governments, banks, tourists, the travelling community, investment opportunists, companies who deal abroad, finance brokers, there are so many different people involved in the Forex market, it is one of the most complete markets you can actually work in. Over $3 trillion goes through the Forex markets every single day, using an estimate from April 2010.

What currencies are traded on the most regular basis?

Using a report from April 2010, the most commonly seen currencies on the foreign currency exchange is;

1.U.S. Dollar = 84.9%
2. The Euro = 39.1%
3. Japanese Yen = 19.0%
4. GB Pound Sterling = 12.9%
5. AU Dollar = 7.6%
6. Swiss Francs = 6.4%
7. CAN Dollar = 5.3%
8. HK Dollar = 2.4%
9. Swede Krona =2.2%
10. New Zealand = 1.6%

(Credit http://www.learntotradethemarket.com)

What is Forex Trading?

The term Forex trading actually involves individuals speculating on the future rates of two different currencies. For example, if a buyer thinks that the US Dollar and the Pound are going to do well in the future, then they will decide to buy in those two markets. However, if they believe that things are about to get a little tough for that currency, they will decide to sell all the currency they have in that particular form. There are a number of strategies out there and books that tell you how to work the Forex markets, and it really does depend on how you want to play it out to decide what strategy is the best one for you to take up.

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