History of Forex Trading

"So what exactly is the Forex market" is a question that I often get asked. I am still amazed that so few people understand why I get so excited about running a home Forex business. Simply but the Forex market (full name is the foreign exchange market or the FX market) is the largest of all the financial markets by the proverbial "country mile". The daily amount traded on the Forex is more than twenty times greater than all of the world's stock markets combined! That is big.

All international financial transaction at some time or other pass through the Forex market. In this age of globalisation, it is common place for customer orders placed in the United States, are sent for processing to another country, which in turn may require supplies from a third country and may be sent back to the United States using a container ship being run by a company from another country. And this covers not only electronics, but many other items we take for granted including the food we eat, the clothes we wear or the cars we drive. Pension fund providers speculate billions in the potential growths in other currencies and alongside them many individual traders make a substantial income whilst working from home.

Up until the mid 1980's the individual trader had little opportunity to trade alongside the corporate traders. The main means of foreign exchange trading relied upon a communications system known as "Reuters Dealing". The system was designed to allow banks to contact each other directly, which is why it was called direct dealing. As technology developed, systems were developed that allowed the matching of sellers and buyers (known as matching systems), but primarily still within the corporate market. These were run by companies like Reuters and EBS.

At the run of the century, the banks caught onto the idea that by setting up their own trading platforms, they could deal directly between each other. As a logical consequence, retail Forex brokers realised the potential of offering trading opportunities to individual traders. At long last, the Forex market became accessible to anyone who wanted to trade the market.

It has been noted that although the Forex market is so large, it is speculation that determines market movement. Traders buy or sell speculating on whether they believe the market sill increase (this is called "buying" or going "long") or the market price will decrease (this is called "selling" or going "short").

Of all the trading that takes place, approximately 75 percent of the volume traded on the currencies of the largest economic powers. These are defined as the "major currencies". This therefore covers the United States dollar, the Japanese Jen, the European Euro, the British Pound, the Canadian dollar, the Australian dollar and the Swiss Franc. This does not mean that other currencies are not being traded, but they are traded significantly less and as a result the opportunities for both corporate and individual Forex traders are vastly decreased.

Learning to trade the major currencies provides traders many opportunities to successfully speculate and make a significant income. Forex trading, however, is not to be taken lightly and I would strongly urge anyone who is interested to invest in the correct training that offers the ability to grow and learn over a period of time.

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