Forex is the Biggest Liquid Financial Market
The wealth made by man had different forms from ancient period onwards. The very first form of wealth was money. Metals in different size and shape were the first form of money. Later round metal coins with values inscribed on it became the integral part of business and other transactions. Soon metals coins were replaced by more precious metals like gold and silver. During the reign of kings the gold and silver coins were the main source of money. With the advent of modern period paper money or currency was invented by middle of 19th century after the period of renaissance. After industrial revolution currency became popular as the main source of money. Currencies with specific values inscribed on it became the main money transaction source everywhere replacing gold and silver coins.
As a result of globalization foreign currency exchange made the transaction between the countries convenient. The foreign exchange markets became the trading centres if international currencies. The foreign exchange currency is termed as Forex or FX. Forex is not absolutely the invention of modern period in currency exchange. There are biblical references of foreign exchange as money changing people who gave aid to other people with regard to change of money for a specific charge or commission paid to them. Their references are given in Talmudic writings during the biblical time. Another reference relating to money changing is traced back to the 4th century where the Byzantium government had a monopoly over the foreign or money exchange. During the medieval period in 17th and 18th century Forex markets were established and maintained in London, Holland and Amsterdam. In the year 1880 the modern foreign exchange began. In 1920’s the Kleinwort family was known as the leaders of Forex market. In 1945 the government of Ethiopia had the greatest foreign exchange surplus.
Remarkable changes occurred after the year 1973 in the Forex market. In 1973 the controlled foreign exchange trading of Forex had an end and much more flexible or complete floating conditions in Forex began that is continued even today. In the year 1985 the European banks began its intervention and supremacy in the Forex market. Bundesbank had all control over the Forex in the year 1985. By the year 1987 majority of the Forex was in the United Kingdom. It had a slight weight age of one quarter over the US and made the US having the Second place in the Forex. In the year 1991 Iran changed international agreements for foreign exchange in exchange of oil barter.
The Forex is the biggest liquid financial market. The growth of the Forex market is day by day indicating steady graph in the global arena. The Forex trade comprises of traders form different sectors. It includes retailers, institutional investors, currency speculators, corporations, central banks and large banks. All the developed countries have fully convertible capital accounts. Due to the capital controls several governments restrict foreign exchange derivative products. Despite several capital controls several countries like South Africa, Korea and India have established currency future exchanges.
The Forex has divided level of access with regard to the members or participants in the foreign exchange. In order to satisfy the economic needs the top level of access consists of inter bank market that include largest commercial bank and securities and currency dealers.
Even though foreign exchange has great control over global economy the risk factor in Forex is unpredictable. Even a potential or initial adverse event adversely affects the market conditions at any time that at times make the Forex unstable. The financial crisis in 2008 had a bad effect in Forex that still affects the market.
Despite all the adversities Forex transactions can be defined as future trading of all sectors irrespective of banks and other currency securities.
Food and water are very essential part of life. They are the main basic requirements for a man’s continued existence. Water as we all know comes from different sources like rain, ocean, rivers, lakes, ponds, etc. But as far as food is concerned it needs either to be grown or searched for. Man has to put forth his effort in order to grow or search food for satisfying his daily requirements. Man always hunted for something more or extra for himself. International trade is just a consequence or result of such a hunt. World trade concept is basically a new thinking and a new beginning. Industrial revolution can be considered to be a basis for the international trade. There was a swift spread out of international trade subsequent to industrial revolution. Industrial revolution brought countries together and hence various countries felt the requirement of acquiring foodstuffs from new countries. Thus world trade grew very fast. The spreading out of world trade was actually a beginning for realizing the importance of economics.
People who were occupied with international import and export were forced to have much knowledge about economics in order to make their trade more easy and comfortable. In the world of today the subject of economics has gained much importance and a person dealing with trade and commerce need to have much information of this subject. Economics help them in trading. Without much knowledge in economics one would find it difficult to handle a national or international trade. In almost all over the world the subject of economics is given much significance and people are being educated in this regard. World trade cannot go without economics as it makes the trading easy and more convenient. A combined study of economics and geography proves that the physical and the biological conditions of various countries do not support all kinds of products on their land. Some countries may be able to produce man made goods, some may be abundant with mineral resources and some others may be best in producing foodstuffs. Some countries would not be able to produce much food products due to less supporting physical and biological condition of that country. But in current world the countries have realized the importance of involving themselves in world trade. There are many advantages in this regard. Countries are able to make themselves sufficient with those products which they are deficient with. A country may be abundant with different resources. But through economics they have understood that giving more priority to some of the produce would economically benefit their country. Each country is a manufacturer of one product or the other. They are not only producing the products but are concentrating in producing such stuffs in abundance so that exporting can be done which can really grow their economic status. There are countries which are unable to produce certain products but are in high need of it. In such cases world trade opens gate of importing. Through importing such countries can fulfill their requirements. Thus world trade has led to the opening of importing and exporting of products. When there are chances of war some kind of inconveniences occurs among various countries due to lack of interactions. But even in such conditions importing and exporting among countries are not much hindered as there are many ways for evading such situations. In this world of today wars are not as common as it used to be once.
There are various benefits which forces countries to bind themselves with world trade. In the present world the study of economics is very essential as it discloses the importance of world trade. Hence one can really say that studies of Economics could make a great contribution to the extension of world trade.
Ever since the history of man kind man was always in search of new methods for the betterment of his life. First he invented barter system of exchanging goods. Later he invented money. He invented metallic coins of copper with specific value inscribed on it. After the copper coins he invented gold and he discovered the unlimited value of this yellow metal. Gold coins were the main source of wealth accumulation in olden times. Only royal families and people from affluent families had the privilege to have gold coins. People in the lower strata always used the copper coins.
After the invention of paper it was found that the paper’s value can be evaluated from the value inscribed on it. Soon the paper money was recognized as currency or a legal transactional value was given to the currency. The currency is always made by the government of a country with its official recognition printed on the concerned currency. The denominations or the value of the currency is printed where the people of a country can use this currency for every transaction. During passage of time the currency became mode of official transaction in every country. Each country has a distinct printed form and value. From the official print it was easy for identification of the currency to the country it belonged. Currency became the popular mode of transaction among people for various purposes. Currency is most commonly used for the trade or business purposes other than that currency also became a popular mode of investment. Currency trading is in fact the most popular form of investment of the modern world. The values of different currencies of different countries are exchanged or traded for a standard or uniform value is termed as currency trading.
There are several type of investments are available for quick trading. It is considered that currency trading is the easiest and safest mode in the investment market. The Forex (FX) or the currency market is the largest investment market in the trading world. Currency trading has three basic trading sessions that include European, United States and Asian sessions. The market hours are 24/7 every day. The market sessions will be closed on Friday evening till Sunday evening. The volume of the currency is not stable during the market hours. At times certain currency pairs will have greater business volume during specific business time. The US trading session usually have the great currency volume when there US dollars are paired. The main feature of currency trading is that it is done in pairs unlike the single shares. The single currency that is purchased or traded need to be sold immediately in the Forex market. Unlike purchase of single shares very currency is priced to the fourth decimal point. Then the augmentation of trade is measured in the Pipvalue. The pip is valued as a percentage in a point. A pip is calculated as the smallest value of a percentage. It is the least increment in the percentage of the value of the currency. The only place in the world where the currency trading is done is in Parris.
The frequent currency trading is done on eight currencies. The US dollar, Canadian dollar, Euro, British pound, Swiss Franc, New Zealand Dollar, Australian Dollar and Japanese Yen are the most often traded currency in the Forex market. The investment in the Forex market is increasing day by day as there is more supply and demand. The value of dollar is increasing day by day that promotes the currency trading market. According to the statistics of 2010, the currency trading market reached a 4 trillion dollar turnover that was a major increase after the year 2007 by an increase of 20%.
Unlike the share market the winning strategy is greater in the currency trading that makes it the popular trading of today.