A Brief History and Desription of the FOREX trading platform...
A BRIEF HISTORY
Forex is a little advanced...but if you are into learning how all this fits together this is fairly straightforward...
Answers a ton of common questions people have about currency trading.
The Forex, FX or currency market is the foreign exchange market. The Forex in its present form originates from 1973. However, it has been around, in some form or another, since the time of the Pharaohs. It is a market exchange for changing money from one form or currency to another. If you want to travel from one country to another, you would have to exchange money, and this is what the foreign exchange market does, it trades currencies
CURRENCIES AND THE FOREX
The Forex market has evolved into a huge over $3.00 Trillion dollar a day market. The majority of the transactions, a whopping estimated 85%, is done in USD (United States Dollar). After that the currencies with the most trading are, the EUR (Euro), GBP (Great Britain's Pound, also known as Cable, Sterling or Pound), CHF (Swiss Franc), JPY (Japanese Yen), CAD (Canadian Dollar), AUD (Australian Dollar) and NZD (New Zealand Dollar). These are all the major currencies.
The most active and lucrative pairing of currencies are EUR/USD and GBP/USD. The British Pound is the most active and fastest moving currency. In order to trade in the Forex, you will want to get a small chunk of the market, in order to get that we have to have a moving market. This means that the currency pair we choose to trade in has to be one that is active and liquid.
WHAT IS LIQUIDITY?
Liquidity means selling to a captive audience for the price that you want. For example, if you were to sell ice to the Eskimos, it would not be a popular product as they have so much of it, and you would not get the same price for it as if you were to sell ice to the inhabitants of a Caribbean island, where ice is a scarce commodity. In the same way, there is a huge currency market which just concentrates on a few select currency pairs because they are the most active currencies. If you choose to trade in a less used currency, you might find not so many people are looking for a trade thus making trading less profitable. The most active pairs are the GBP/USD and EUR/USD. The foreign exchange market is the largest and most liquid financial market in the world.
HOW DO CURRENCIES MOVE?
If you live in the United States of America, and want to go on vacation to Great Britain, you will have to buy pounds with your dollars. This is called a foreign exchange trade. When you are buying a currency, you will be selling another. Exchanges always happen in pairs, you are always exchanging two currencies. If your exchange pair is GBP/USD: If you buy pounds, you will be selling dollars, and if you are selling pounds, you will be buying dollars. You just need to decide whether you are selling or buying, this is a function of a free-floating currency.
When you want to trade in the Forex, you need only concentrate on one thing, whether the chart is going up or down. If the chart, or currency, is going up, the thing to do is buy. If the chart, or currency, is going down, the thing to do is sell.
THE 24-HOUR MARKET
The Forex market is also unique in that it is a 24 hour market. You can trade the Forex 24 hours a day if you so choose. The currency market follows the sun around the world, the sessions flow as follows. If we look at all times as Eastern Standard Time, Tokyo will open at 7 pm EST and close at 4 am EST. London will be the next market, opening at 4 am EST and closing at 12 noon EST. London has the added distinction of being the largest, oldest currency center in the world. It accounts for around 36.7% of all the trades around the world, making it the most important global center for foreign exchange, New York would be second with around 17% and Tokyo third with around 6%. Another distinction about the London market is that the time slot from 4 am EST till 10:30 am EST is well-known to traders as being the most active time when a lot of big moves are made in the market. After London, is the time for the New York market to open at 8 am EST until 5 pm EST. Another good time for trading will be at 5 pm EST until 7 pm EST, because there will be lots of activity in the market at this time as well.
Rollover happens every day at 5 pm EST. Brokers shut down their tradings from 4:58 pm until 5:05 pm. They do this in order to rollover the open positions from one day to the next. In the Forex, the interest rates are set daily, so they rollover will roll the interest from one day and update it to the next day.
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