Introduction Forex
FOREX – AN INTRODUCTION
Forex also known as Foreign Exchange being one of the largest and most risky markets of the world, there are lots of risks and opportunities that come with the market. So before entering into the market one should be well aware of all its pros and cons. Forex trading is described in two scenarios namely bear market and a bull market. This is the only market where we can expect maximum return in a day on the contrary we can also expect the vice- versa.
So in short we can say that it is a maximum risk business. Since it is stated that Forex market is a liquid market which means that one can never expect the direction it will move like the liquid in a moment it rises up to give you maximum profit on the other it may go vice-versa. The Forex Market trades with an approximate amount of 3 trillion every day. The trading in the Forex market is not organized by a Central Exchange unlike the stock market. In this market, trading is done through interbank market.
Here the trading is done throughout the world directly with the trading partners via phone or electronic networks. The most interesting feature of the Forex market is that it is a 24 hour market which has the main centers in the leading cities of the world like Tokyo, Sydney, New York and London etc.
In the past years the value of goods were expressed in terms of other materials but due to the limitation of this system the people are encouraged to establish a newer and more advanced system and then metal coins came into existence. However gold and silver are the most common metals that are used in return of goods in those days. But with the passing days the stable government of those days introduced the paper money as the mode of currency. However the paper currencies have been accepted by most of the countries before the World War 1 with its convertibility to gold.
As the time passes, most of the countries started increasing the supply of the paper money resulting in political instability. In order to save this the first foreign Exchange control was setup in order to keep control on the matter. With the passage of days several regimes were passed in order to safe guard the foreign exchange control. The Bretton Woods agreement passed a law and partly brought the old gold standard in the new system, and given a permanent value for US dollar at USD35/oz and values of other main currencies to the dollar.
After so many decades many regimes were passed in order to safe guard the interest of the foreign exchange and today the foreign exchange trading came up as one of the largest global market making business of around USD 3000 billion per day.