What is Forex?

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What Is FOREX ?

Forex, widely known as FX, is the marketplace where many different national currencies are traded. The forex market is the largest, most liquid market in the world, with trillions of dollars changing hands on a daily basis. The FX Market is decentralized (no central location), so it is conducted via an electronic network of banks, brokers, institutions, and individual traders.

Many entities have currency needs (in order to exchange goods & services) and some may also speculate on the direction of a particular currency pair. Hence, there is constantly a massive pool of orders to buy and sell currencies on the network which interact with other currency orders from other parties.

The forex market is open Sunday to Friday, 24 hours a day, 5 days a week. The largest foreign exchange markets are located in major global financial centers like London, New York, Singapore, Tokyo, Frankfurt, Hong Kong, and Sydney.

Risk warning: FX and CFD trading involves a high risk of loss. T&C’s apply

Forex Online Trading

Forex Trading

In today’s world, trading currencies is very easy and anyone can do it. Many investment firms, banks, and retail forex brokers offer the chance for individuals to open accounts and trade currencies.

A currency is always traded relative to another currency (e.g EUR/USD). If traders sell a currency, they arebuying another, and vice versa. There is no physical exchange of money from one party to another. Instead, in the world of electronic markets, the trader takes a position in a specific currency, with the hope that there will be some upward movement and strength in the currency they’re buying (or weakness if they’re selling) so they can make a profit.

A brief FOREX history

Currency trading and exchange first occurred in ancient times and was carried out through Money-changers (people like silversmiths and/or goldsmiths, helping others to change money and also taking a commission or charging a fee).

Currency and exchange were important elements of trade in the ancient world, enabling people to buy and sell items like food, pottery, and raw materials.

During the 15th century, the Medici family were required to open banks at foreign locations in order to exchange currencies to act on behalf of textile merchants.

The year 1880, the gold standard began and is considered to be the beginning of modern foreign exchange.

At the end of 1913, nearly half of the world’s foreign exchange was conducted using the pound sterling and thenumber of foreign banks operating within the boundaries of London increased from 3 in 1860, to 71 in 1913.

During the 1920s, the Kleinwort family were known as the leaders of the foreign exchange market.. By 1928, Forex trade was integral to the financial functioning of London city. Continental exchange controls, plus other factors in Europe and Latin America, hampered any attempt at wholesale prosperity from trades.

In 1944, the Bretton Woods Accord was signed, allowing currencies to fluctuate within a range of ±1% from the currency’s par exchange rate. In Japan, the Foreign Exchange Bank Law was introduced in 1954 and Bank of Tokyo became the center of foreign exchange.

U.S. President, Richard Nixon ended the Bretton Woods Accord in 1971 and fixed rates of exchange, eventually resulting in a free-floating currency system. The Smithsonian Agreement allowed rates to fluctuate by up to ±2%.

Reuters introduced computer monitors during June 1973, replacing the telephones and telex used previously for trading quotes.

Some sources claim that the first time a currency pair was traded by U.S. retail customers was in the year1982, with additional currency pairs becoming available by the following year.

On 1 January 1981, the People’s Bank of China allowed certain domestic “enterprises” to participate in foreign exchange trading. Sometime during 1981, the South Korean government ended Forex controls and allowed free trade to occur for the first time.

The greatest proportion of all trades worldwide during 1987 were within the United Kingdom. The United States had the second highest involvement in trading.

Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority (78.9%) of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.