<-!-JAP8NTl-> What is Forex
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what-is-forex

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Forex (FOReign EXchange, FX) market is an inter-bank currency exchange market. In 1971 Forex market replaced the Bretton Woods system - rates were no longer fixed but floating. Basically Forex is a multitude of currency exchange transactions when counter-parties exchange specified sums of one currency to another at an agreed rate on a certain date. The exchange rate is determined by market forces - offer and demand.

The overall volume of transactions in the global currency market is constantly growing. This is due to the development of international trade and abolition of currency restrictions in many countries. Daily turnover of conversion transactions in the world is estimated at $4 trillion. About 80% of all transactions are speculative transactions with intention to derive profit from jobbing on the exchange rate differences. Jobbing attracts numerous participants, both financial institutions and individual investors.

With the highest rates of information technologies and communications in the past two decades, the market itself has changed beyond recognition. Once surrounded with a halo of caste mystique, the profession of currency trading has become almost a mass. Currency transactions, which were recently privilege of the biggest monopolist banks are now publicly accessible thanks to e-commerce systems. And the foremost banks themselves also prefer trading via electronic systems rather than individual bilateral transactions. Daily transaction volumes of the largest international banks - Deutsche Bank, Barclays Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Chartered Bank are estimated at billions of U.S. dollars.

An important feature of the Forex market, however strange it may seem is its stability. Everyone knows that one of the properties of the stock market - its sudden falls, which has been proved very clearly during the recent crisis. Unlike the stock market, Forex is not falling. If the shares become worthless - it's a catastrophe for the both - issuer and investors. If one currency collapses, it only means that another one gets stronger. In late 2008 - early 2009 for instance, the Dollar has risen by tens of percent against all currencies. Still the market did not collapse and trade continues as usual. This is the stability of the market and related business - currency is an absolutely liquid commodity and will always haggle. The main advantage of the currency market is that one can achieve a sustained success with the power of intellect.

Forex is around the clock. It is not related to any specific timetables as trade takes place among banks located in different parts of the World. The mobility of exchange rates is such that significant changes happen quite frequently, which enables to make several transactions every day. If you have an elaborate and reliable trading technology this can be turned into a business no other will be able to compete with. No wonder why banks buy expensive electronic equipment and maintain hundreds of staff of traders, working in different segments of the currency market.

Initial cost of getting into the business is extremely low. One needs to undergo a basic training, to buy a computer, to open an account and make a deposit - everything under several thousand dollars. You will never ever be able to start up any other business with such money. It is more than easy to find a reliable broker too. The rest of course depends on the trader only. Just like any other activity nowadays you are getting yourself into - it all depends on your personally. International monetary system has gone a long way over the millennium of human history, but there are no doubts we have seen it changing in the most interesting and previously unthinkable way. There are two main changes determining a new image of the World's monetary system:

  1. The money is fully separated from any tangible media or equivalent.
  2. Powerful information and telecommunications technologies made it possible to combine monetary and banking systems of different countries into a single global financial system that has no boundaries.