SolveYourProblem Article Series:
Learn Forex Trading / Currency Trading Tips

Global Economies and Expansion: The Forex Market

The foreign exchange market, or forex, is currently the largest and most liquid market in the world. The forex is a worldwide market that never closes. It is open 24 hours a day across the globe. Global expansion plays a large role in the success of the foreign exchange market.

The foreign exchange market was developed in 1973. However, currency, in one form or another has always been a large part of society. The first known currency traders were in the Middle East. These traders exchanged one country’s coins for another. The introduction of paper money made currency exchange easier to do and therefore more common. The strengthening of global economies further encouraged international trade and foreign exchange while bringing benefits to all countries that participated.

In order to get to its current state, several changes had to be to the previous methods surrounding foreign exchange. The first of these major changes took place in 1944 and is known as the Bretton Woods Accord. At the end of World War II France, Great Britain, and the United States convened to establish a new economic order.

It was at the meeting at Bretton Woods that the United States dollar became the monetary standard in currency. This means that traders and dealers would use the dollar when determining the values of other currencies throughout the market.

Before the gathering at Bretton Woods, the British pound was the standard currency. However, because of the chaos that WWII had on Europe, a change was necessary. The hope was that switching to the dollar, as the means to compare foreign currency, would stabilize global affairs and international economies.

Then in 1971 another change was made called the Smithsonian Agreement. This agreement amended the Bretton Woods Accord by allowing for additional fluctuation within the foreign exchange market. The Bretton Woods Accord was considered free floating and was officially replaced in 1978. The Smithsonian Agreement allowed governments to peg or semi peg their currencies, or allow their currencies to float freely.

Currently the market operates with all major currencies moving independently of one another. Because there are no limitations on the currency on this open market there is a growing influx of trade amongst independent investors, brokerage houses, banks, and independent dealer.

The free floating system is still in place today, and is proving to be extremely practical in a market that undergoes a change in currency rate every 4.8 seconds. The foreign exchange market boasts 2 trillion dollars in trades everyday, and play exceptional roles in participating country’s economies.

Through global expansion the forex market has become a worldwide phenomenon. Any given transaction made in one country is bound to spur additional transactions worldwide. This domino effect is due primarily to the fact that brokers will readjust their positions to manage their risks.

The foreign exchange market is truly a global entity. It spans around the entire word and is hugely popular because it is open 24 hours a day in every country. Although the foreign exchange market is worldwide, it does not have a physical, centralized location for activity. However, the major exchanges are located in New York, San Francisco, Hong Kong, London, Tokyo, Singapore, Sydney and Bahrain. Because the forex does not have specific operation site foreign exchange trades are considered over the counter. Trading takes place through the use of computer terminals, telephones and broker desks, and is highly influenced by the global economy.

Furthermore, it is expected that as more investors discover the forex, it will continue to grow exponentially. The forex already makes 30 times more trades than any other market, and will continue to grow.

# # # # #

SolveYourProblem.com : 2007

> Home > Forex Trading: Main Page