subject: The Forex- A Welcome Newcomer [print this page] The Forex- A Welcome Newcomer The Forex- A Welcome Newcomer
For those who've never heard of the Forex, this is the market wherein currencies are traded. It's perhaps the biggest of all capital markets and certainly the most liquid. Trading 3 trillion Dollars daily, it attracts investors from all four corners of the globe.
Interestingly, the Forex can be traced to the beginning of times when rocks and feathers were used as legal tender, and were utilized to pay for all sorts of goods. However, people didn't start exchanging currencies until these were minted by individual nations. Back in the old days if the Greek coin was heavier or bigger it could be exchanged for services. However, there was no real currency exchange market because the majority of the monetary units were backed by gold. During such times, if money lost its value, people would then trade it in for precious metals.
It wasn't until the end of World War II that the allied countries got together and agreed to create a formal exchange between them. This was a real attempt at stabilizing the foreign exchange rates. They set a specific value for each one against the U.S. Dollar, and in turn the greenback was given a peg cost of $35.00 per ounce of the shiny metal.
But a lot has happened since then. Inflation in the U.S. and problems with the honor system altered the status of what was agreed between the nations. In the 1970s President Nixon closed down Fort Knox, where gold reserves were kept; and futures trading gave rise to real FX trading.
As the Forex took off with the advances of the Internet, it became one of the most sought after financial vehicles. Its fast response to supply and demand made it the ideal investment for profit seekers everywhere. As an over-the-counter market, Forex online operates 24 hours a day, five and a half days a week. This means that it's not centralized like the stock exchanges and it's accessible from anywhere in the world.
As you would expect, the U.S. Dollar is the most traded of all the currencies; however there are others which are considered "the majors" and these include the Euro, Pound Sterling, Japanese Yen, Canadian Dollar, Swiss Franc and Australian and New Zealand Dollars. Other monetary units favored by day trading enthusiasts include the South African Rand and the Krona among others; they're considered "exotic." Note that these currencies are quoted in pairs. Because of the fact that the economy of the United States is the largest, the country's currency plays center stage and accounts for almost 65% of the world's reserves.
It's also important to note that while commercial transactions make part of Forex trading, most of its volume stems from speculation. Simply stated, it comes from currency trading by individuals like you and I. This accounts for the Forex's liquidity and the ease with which anyone can buy and sell currencies. Hence, the opportunities for profit with a Forex trade are beyond amazing.
