In layman’s terms, Forex trading is the action of banks, businesses, governments and others trading currencies. The market which Forex trading takes place is called the Fx market, currency market or the foreign exchange currency market. Everyday, nearly four billion dollars is traded on the fx market.
Because it expands across borders and time zones, unlike standard stock markets, the fx market is open 24 hours a day and 5 days a week. There are fx markets all over the world but the primary locations are in New York, Tokyo, Frankfurt, Hong Kong, Zurich, Singapore, Sydney, and Paris.
The fx market is completely different from stock markets like the New York Stock Exchange. There is no central market place for Forex trading, instead the market is a combination of every major bank and financial institution in the world. The quotes people receive for Forex trading come from the banks instead of a regulated organization, this means that not all banks will list the same prices for all currencies.
When someone believes that one currency is more valuable than the other, or they believe that one currency will soon become more valuable than the other, they exchange their home currency for the currency they believe to be more valuable. This is the gist of Forex trading. Some describe Forex trading as more of a gamble than an investment. Before you begin a career in Forex trading you should understand that you can lose your investment really quick. If you trade the US dollar for the Euro, then the US dollar rises in value, you have lost a considerable percentage of your investment. Again, it is impossible to stress the importance of getting to know the world economy prior to investing in a foreign currency. Trade 111 and market gbp are good brokers that can help you in you online trading adventure.
The History of FX Market
Before you begin trading on the Fx market, you should learn a little bit about how the Fx market came to be. Everyone knows that you can exchange your home currency for a currency from another country. For anyone that has been on vacation, you have been required to do this. The Fx market was created so that people could invest in the currency of other countries and trade them for profit.
In 1876, the gold exchange standard was implemented across several countries. The idea behind the gold standard was that all paper money had to be backed by physical gold. In theory, the idea is brilliant, but in practice it falls short. The gold standard creates a situation where countries with lots of gold could crash any country’s currency whenever they wish. This caused a volatile market. The gold standard was eventually abandoned in favor of central banking systems.
The United States was one of the last countries to remove the gold standard from their economy in 1976. Now that all currencies were purely based on a centralized debt system, it enabled the creation of the Fx market.
What makes Forex Trading Popular?
It is not easy to become a successful Forex trader, but if you are one of the few that put the effort into learning how to predict the market, you can live a very luxurious life.
Before you begin trading you should make sure are emotionally ready and intellectually prepared. You must apply logic, patience, organizational skills, discipline, and many other skills to ensure that you become the very best Forex trader possible.
Many individuals and organizations are already taking advantage of the Forex market. Banks, Companies, central banking systems, hedge funds and investors are all using the Forex market successfully. With nothing more than dedication, there is nothing stopping you from becoming a successful Forex trader.