Forex market trading was derived from the foreign exchange. The foreign exchange market which is commonly know as the forex market or fx has not been around for all that long. It was developed in the early 1970′s. The reason was because the United States had dropped the gold standard. This dropping of the gold standard caused national currencies to go haywire if you will. Prices began to fluctuate uncontrollably. When this occurred banks seized the opportunity to buy currency when it’s value was low and then resell it after it strengthened. Thus the forex market was born.
In todays forex market there is over trillion in transactions each day. The global forex market operates 24 hours a day, Monday through Friday. This is due to the different time zones worldwide because let’s face it, it is always day time somewhere in the world. Some of the most popular forex market trading revolves around the U.S. Dollar,Japanese yen, the Euro, British pound, Austrailian dollar and the Swiss franc.
Forex market trading performed by individuals accounts for only about 2% of the forex market. The forex market is comprised primarily of government banks, international banks, corporations, investment banks and hedge funds. Even at just 2% of over trillion that still equates to quite a tidy sum of money.
When participating in forex market trading it is always done in pairs. In other words you purchase one currency and sell another. The concept is rather simple. The theory behind this is to perform your trade when you feel that the currency you’re buying is going to rise in value in comparison to the currency you are selling. If you’re feeling was correct then you would perform another trade the other way. You would sell the currency you initially brought and purchase the one you sold.
As an example of this, let us say that the market offers a pair of currencies like this: GBP/EUR 1.2200. This would mean that the purchase price of one British pound is 1.22 euros. If an investor predicted that would change and that the euro was going to strengthen and be more valuable than the pound, you might sell let’s say 100,000 pounds, and buy 100,000 euros, and then wait. Then maybe two or three weeks later the rate of exchange fluctuates to this: EUR/GBP 1.3100. So this means that the euro is now worth 1.31 pounds, which would equate to a profit of 0.11 per unit.
The foreign exchange market is huge and quite tricky at times. It is inhabited mostly by large organizations and huge institutions. But this doesn’t mean that you can’t be one of the 2% of individuals that has elected to try your hand at forex market trading.
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