Man has basically bartered and traded goods since time immemorial. The value of goods was expressed in terms of other goods and it is out of this that currencies were born. At first, the currencies were metals, colored feathers, pretty stones and animal teeth and later on silver and gold. Each country developed their currencies as time went by and came to have the modern paper currency as we know it today.
Most countries supported their currencies with gold reserves prior to World War 1. This gave way to a new order where the value of currencies was expressed in terms of US dollars and the price of gold. As trade between countries grew in leaps and bounds so did the exchange of currencies and this is how the Forex trading market came into being. Many countries around the world lifted restrictions against capital flow allowing currencies to adjust according to their perceived value. Currencies that were devalued against the US dollar were made vulnerable. The currency exchange environment became highly volatile and this opened up a new playing field for big time investors to profit from pitting one currency against another.
This is known as the Forex market today and it has gained in popularity among the masses as even small time investors are able to trade currencies via the Internet. The market trades currencies to the tune of three trillion dollars each day and has overtaken the entire world’s combined stocks and bonds markets.
Trading can be done from any corner of the world at any given time. The Forex market does not have a central exchange and is conducted in an over-the-counter manner. Trading can be between individuals conducted over the electronic media or over the telephone. The market is made up of the big time players such as governments and companies that require exchange of currencies stemming from trade and other traders who are mainly involved in speculative currency trading.
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