What Is The Forex Market All About?

The term

Exchange Market.

What are being exchanged on this market are

from around the world.

In other words, the Forex market is

major currencies are bought and sold. It represents the largest financial market in the world

by volume.

The origins of the foreign exchange market date back to 1944, when The United Nations

Monetary Fund convened in Bretton Woods, New Hampshire to devise a plan for stabilizing

the world economy.

The British Pound had been, up until World War II, the monetary unit of choice when

comparing the relative value of foreign currencies. However, Hitler's regime managed to

devalue the Pound by way of a massive counterfeiting scheme. Something had to be done

quickly in order to avert a worldwide economic depression.

Out of this meeting came the

Gold Standard, tying the value the U.S. Dollar to the price of one ounce of gold ($35.00 per

ounce at the time). It was further agreed that the Dollar would replace the British Pound as

'Forex' is short-hand for 'foreign exchange.' The Forex Market = The Foreignnot stocks or bonds, but currencies (monies)the place where U.S. dollars, Euros, Yen and otherBretton Woods Accord. This new policy implemented the

the benchmark “currency of exchange”.

All other currencies were aligned to the Dollar, and a 'fixed exchange rate” of +/

established.

In other words, a foreign currency could fluctuate up to a maximum of 1% higher or lower

than the Dollar. Any fluctuations beyond this limit required that the 'offending' nation's

central bank step in to correct the imbalance.

The Bretton Woods accord remained in effect until 1971, when it was determined that the

U.S. dollar could no longer hold steady relative to gold. At this time, the 'fixed exchange rate'

model was abandoned in favor of the 'floating exchange rate' we still use today.

- 1% was

Note

closely when we get into the nuts and bolts of Forex.

The important thing to understand right now is that Forex trading among private investors is

still relatively new. The market once operated almost exclusively between government

(central) banks and commercial banks until advances in communication, such as the

Internet and PC banking, allowed speculators easier access to the market.

The Forex Market today represents the largest and most 'liquid' of all markets in the world.

The daily 'turnover' of trade volume, speaking in U.S. dollar terms, is on the order of trillions.: If any of these terms are unclear or confusing, don't worry. We'll look at them more

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