What is Forex?

So what is forex exactly? It could be said that when the US dollar was no longer converted into gold in 1971 that the environment for the Forex market really started. Once this started it didn’t take too long for other countries to follow. The currencies of other major economies started to float freely around 1973 & were controlled by the process of supply & demand.

Eventually this led to market deregulation & prices could float naturally. Out of this process new financial tools & processes were created & refined over time.

At a later stage when computers became much more sophisticated, money could be moved around with such ease between the continents such as Asia, America & Europe & thus set the stage for the Forex revolution.

Nowadays, transactions in the global foreign exchange markets has accelerated from billions of dollars a day to one & a half trillion dollars a day. This is a colossal sum of money & there is money to be made from these transactions & not just by experienced stock brokers but by anyone who is willing to take a risk.

Another process that accelerated the Forex was the eventual setup of the euro / dollar market. This market comes about when the dollar is deposited in banks outside the United States & likewise when the Euro is deposited outside European banks.

This happened in the 1950s when Russian oil revenue was transferred into dollars & was then deposited outside the US in case it was frozen by government sources. So in effect there were a lot of US dollars floating around the world but out of US control.

So, how does the Forex affect the average person on the street? Currencies are traded on the foreign exchange markets throughout the world every day & do have an effect on everyone, this is because currencies need to be traded in order to conduct foreign business. So its very important to get a good forex education before you delve into the forex market.

So if someone form the US was going on holiday to Europe then they would need to exchange their dollars for Euros before they went on holidays as dollars are not the accepted currency in Europe. Also if a business needs goods or services from Europe then they would need to pay for these services in Euros.

This is why the Forex market is so vast, the need to exchange currencies at their current exchange rate which involves everyone all around the world at some stage of their lives. Current estimates are that almost two trillion dollars are traded daily & this is growing all the time.