Forex Trading: An Introduction

YOU ARE HERE- So, before you enter the ring with a demo account

, you should have a sort of mission briefing and battlefield analysis private.

Foreign exchange is the simultaneous buying of one currency and selling of another. Forex trading simply means the trading of international currencies which is facilitated by financial centres which provides a platform for the exchange of international currencies between buyers and sellers from different parts of the globe.

An account is typically funded with currency of your resident country. A few forex brokers offer the option of funding with a non-local currency. It is important to understand a forex transaction is effectively a spread between two countries .You cannot simply buy the USD or sell the JPY- the purchase or sale must be in relationship to another currency. This is one of two important facts to remember as we delve into the world of foreign exchange trading.

The foreign exchange market is the largest financial market in the world, with a turnover volume of $4 trillion daily. This is more than three times the total amount of the stock and futures markets combined and almost a doubling in past five years.

Unlike other financial markets, the forex spot market has neither a physical location nor a central exchange. It operates through an electronic network of banks, corporations, and individuals trading one currency against another. The lack of physical exchange enables the forex market to operate on a 24-hour basis, spanning all time zones across the major financial centres. This fact- that there is no centralized exchange- is the second important fact permeating all aspects of the forex experience.

Like other economic concepts forex trading also didnt spring up out of a hole in the ground but gradually evolved out of economic conferences and decisions.

After world war ended in 1945 Bretton Woods Accord came into place in order to establish a new international economic order but guns and butter policy of President Lyndon B. Johnson signalled the end of Bretton Woods Accord and ultimately by the end of U.S dollar convertibility into gold by President Richard Nixon made major currencies free floating, later Smithsonian agreement and European Joint float did nothing to prevent it and finally floating currency rates were declared acceptable and gold lost its reputation of a reserved asset, after The Jamaica Agreement.

So, from forex history we learn that geopolitical hubris blinded our leaders to the fact that they couldnt control currency values forever.

by: walterabish

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