Forex Trading is also referred to as the foreign exchange. There is a lot that may be misunderstood that needs better clarification. For example, by definition, Forex trading is the act of buying a currency while selling another all at the same time. Simply put, just money exchange.
Historically, Forex has existed in some way or another for years. From biblical times, there was evidence of recordkeeping for foreign currency exchanges and more.
All in all, the forex market is special in various ways. Forex is one of the world’s financial markets that is open nearly every hour of the week. It is open for trading 24 hours a day, 5 days a week.
Forex is easy to understand but many may seem confused
Forex is simply a market, but an international marketplace. The best way to explain it is that Forex is where currencies are traded. By definition, Forex is, “the simultaneous act of buying one currency while you sell the other.”
All in all, currencies are crucial to everything in the world. Why? Because currency drives and enables the buying of goods and services. However, when you buy beyond your city or country you need to have international trade for business.
In the Forex market, currencies need to be traded in pairs. So, if you are in the United States and want to buy food from China or Germany then you have to exchange different currencies. Basically, this translates into exchanging the equivalent value of one currency to another foreign currency.
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Forex has ancient origins that dates back hundreds of years
Forex may not go back exactly to Ancient Rome, but it does go back to its original inception 500 years ago. For example, the very first market for Forex started in Amsterdam, Netherlands. If you go back conceptually about foreign exchanges and trading can be traced to the Talmudic writings. However, some money exchanges have been evident from ancient Egyptian records that date back to 260 BC.
The Talmudic writings can be traced to the 4th century in Galilee in present day Israel. The Talmud, which is the body of Jewish law, and has had a lot of influence. In this reference, the word Talmud literally refers to the Babylonian period.
The whole idea of trading and being free to trade was very instrumental in stabilizing currency. Moreover, the idea of Forex developed into the Gold standard in 1875. Therefore, the origins of today’s market have dynamically grown a lot.
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Forex deals with a lot of money everyday that is the most in the world
The amount of money that is discussed with Forex is shocking and hard to believe. However, Forex deals with trillions everyday. Yes, this is true it deals with trillions. Forex is the most liquid market in the world today.
If we are to go by estimates, Forex is estimated to deal around or more than $7 trillion every single day every year. The number grows exponentially as the world becomes more globalized in every way.
In general, there is no other market that can even approach Forex in terms of financial volume. For example, in terms of volume, the whole industry went up from $1.95 quadrillion dollars in 2016 to nearly $2.5 in 2019.
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There are many different types of Forex Trading
There are a variety of different types of trading in the Forex trading market. What is confusing is knowing exactly what is going on among Forex traders.
First, there is the day trader. This type of trader does short term trading focusing on buying and selling currency pairs. This is all done on the same day. Then there is the Swing trader that tries to trade over a period of a few days to several weeks.
Lastly, the position trader that buys an investment for investment. The expectation is for value appreciation over the long term.
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Cryptocurrencies are challenging the Forex market more and more
The Forex market has a long history that at times seems quite invincible. However, more and more there are changes that are taking place in the marketplace everyday. Cryptocurrencies are growing and their viability is seen as more relevant in this global and digital marketplace even more so.
The cryptocurrency markets have grown because of the digital nature of finance, business, and of course communication. The transaction volume of the cryptocurrency market is at the moment trading in the tens of billions. This is a good chunk of volume but still far behind the Forex market.
Cryptocurrencies in general are making gains every year. Also, with the near constant growth of cryptocurrencies there is a chance that Forex markets may be topped in revenue volume. The growth of cryptocurrencies is expected to grow to nearly 2.2 billion by 2026.
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Forex will never end or go away or become irrelevant
There are no real sights of when Forex trading disappears. The need for currency exchange, evaluation, and more is very profound. Traditional currencies in some shape or manner may go away, but there will be a need for exchanges in some manner.
The threat of a world currency is less possible because of the massive difference of landscapes, culture, and many variables around the world. Also, the need for the exchange of currencies is given for anyone on the move or going between different places around the globe from Asia to South America to Europe to Africa and more.
In conclusion, the fact is that the Forex market and trading is the biggest financial market in the world. Also, in general, currencies are a constant and important aspect in our society, so Forex seems destined to stay strong. Moreover, Forex trading will be needed in terms of being needed as a way to trade one way or another with each other around the world.
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The USA is not the center of the Forex trading market worldwide
Many may assume that the United States is the center of the economic and trading world. As much as the United States is the biggest world economy, the USA is not the center of trading worldwide, instead it is in London, England.
Statistically, Forex is a massive international marketplace. However, the United States only makes up about 19% to 20% of the worldwide industry and capacity for Forex trading. Even though the United States is the biggest economy it is the United Kingdom that is the center of Forex trading.
Forex trading is not very easy in Europe, Asia, and other parts of the world. Moreover, the United States has proposed and enforced regulations that make Forex trading difficult.
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Forex Trading used to require millions of dollars and investment
Millions are used to be required to make it even possible to do business as a Forex trader. The market is not for beginners or anyone like cryptocurrency trading and bitmining. In the past, Forex trading required an institution and real financial backing.
However, Forex trading is becoming more accessible and easier. The reality is that it is still unattainable for many. In essence, you need to have at least $40 million on hand to trade for Forex. There is change as you can use as little as $10 to just trade
Also, Forex trading is becoming so versatile that you can access trading all over the world from any location that has an internet connection.
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The United Kingdom is the center of Forex Trading
The center of the Forex trading market is the United Kingdom. There is a reason why the UK is the center of the Forex world. For example, in terms of international trade, the foreign exchange market of the UK is very important overall. In comparison, the USA accounts for 19 percent of Forex trading compared to 43 percent from the UK.
In terms of international trade and investing, the UK has always been very important for financial international exchange. The UK supports exports and imports, so resources are vital in every way. Therefore, a big international presence is needed for trade thus Forex is more vital here than anywhere else in the world. The UK would suffer if it was less connected internationally.
Statistically, there has been research that has shown that Forex trading has increased by 30 percent. So, despite Brexit, the split from the European Union, the UK is still a global leader and hub for Forex. London is a driving force for international finance.
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The United States Dollar dominates the Forex Market
Even though the USA is not the center of the Forex market, the dollar is the preferred currency for Forex. The US dollar is so pervasive in the Forex market that it accounts for about 80% of all trading.
The US dollar was created to become the currency of the Federal reserve bank. Moreover, within six decades of the start of the Federal reserve bank the US dollar has become the world’s currency reserve preference and standard.
Statistically, around 61% of all foreign bank reserves are in U.S. dollars. As well, almost 40% of the world’s debt is in US dollars.