22‏/12‏/2008

How To Get Started In Forex Trading

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The foreign exchange market (FOREX) offers many advantages to investors. But you need to know where to begin. This short guide will give you the FOREX basics, so you can quickly start participating in this fast growing market.In the past, foreign exchange trading was limited to large players such as national banks and multi-national corporations. In the 1980’s the rules were changed to allow smaller investors to participate using margin accounts. Margin accounts are the reason why FOREX trading has become so popular. With a 100:1 margin account, you can control $100,000 with a $1,000 investment.
A Learning Curve FOREX
is not simple, though, so you’ll need some knowledge to make wise investment decisions. Although it is relatively easy to start trading on the FOREX, there are risks involved. Your first move as a beginner should be to find out as much as possible about the forex market before risking a dime.
Find A Forex Broker
FOREX traders usually require a broker to handle transactions. Most brokers are reputable and are associated with large financial institutions such as banks. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.
Open an Account with a forex borker
Opening a FOREX account is as simple as filling out a form and providing the necessary identification. The form includes a margin agreement which states that the broker may interfere with any trade deemed to be too risky. This is to protect the interests of the broker, since most trades are done using the broker’s money.Once your account has been established, you can fund it and begin trading.Many brokers offer a variety of accounts to suit the needs of individual investors. Mini accounts allow you to get involved in FOREX trading for as little as $250. Standard accounts may have a minimum deposit of $1000 to $2500, depending on the broker. The amount of leverage (how much borrowed money you can use) varies with account type. High leverage accounts give you more money to trade for a given investment.Trades are commission-free, meaning that you can make many trades in one day without worrying about incurring high brokerage fees. Brokers make their money on the ’spread’: the difference between bid and ask prices.
Paper Trading Forex Market
Beginning traders are strongly advised get accustomed to FOREX by doing "paper trades" for a period of time. Paper trades are practice transactions that don’t involve real capital. They allow you to see how the system works while learning how to use the various software tools provided by most FOREX brokers.Most online brokers have demo accounts that allow you to make free paper trades for up to 30 days. Every new FOREX investor should use these demo accounts at least until they are consistently showing profits.
FOREX Software
Each forex broker has its own set of software tools for making transactions, but there are a few tools that are common to all FOREX brokers. Real-time quotes, news feeds, technical analyses and charts, and profit-and-loss analyses are some of the features you can expect to see on most online brokers’ web sites.Almost every broker operates on the Internet. To access a broker’s online services you’ll need a reasonably modern computer, a fast Internet connection, and an up-to-date operating system. Once your account is set up, you can access it from any computer just by entering your account name and password. If for some reason you are unable get to a computer, most brokers will allow you to make trades over the phone.

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Forex Trading Systems

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You should build your own trading system

A trading system on the Forex market is a type of strategy that allows traders to trade with a set of rules. There are many free trading systems and strategies printed in trading articles, journals, books and on trading-related websites. I would have to say that if you are not inclined to learn how to develop your own trading methodology, then perhaps you should consider giving your money for someone else to invest. Give it to someone who is trading a system that he developed and tested himself because he is more likely to have the confidence and courage to follow his own trading system.
Why you need a forex trading system?
1. It’s easy to trade with a system.
2. A good system provides consistent result.
What makes a good trading system?
• It’s simple. Forget complicated systems with lots of rules - it’s a proven fact that simple systems work better - and are less likely to fail, in the brutal world of trading.• A trading system with profitable expectation.• It provides good ratio of reward/risk.• A system of comprehensive risk management including market exposure weightings, stop-loss provisions and capital commitment guidelines that preserve capital during trend-less or volatile periods.
Once you learn how to develop trading systems and strategies, you can then be better equipped to test them as well. By this point you might even find that the system created by yourself is the best one for you, because it becomes the system more suited to your profit objectives while operating within your risk tolerance levels. It is likely that once you develops this level of competence, you will simply acquire other trading systems only to dissect them, grab the parts you likes and add them to your own system. To me, the irony is that for a trader to know which system to purchase, you must first learn how to create a system. And after knowing how to create a system, he will no longer have the need to buy one
.

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Trading with Strategy

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Trading successfully is by no means a simple matter. It requires time, market knowledge and market understanding and a large amount of self restraint. ACM does not manage accounts, nor does it give market advice, that is the job of money managers and introducing brokers. As market professionals, we can however point the novice in the right direction and indicate what are correct trading tactics and considerations and what is total nonsense.

Anyone who says you can consistently make money in foreign exchange markets is being untruthful. Foreign exchange by nature, is a volatile market. The practice of trading it by way of margin increases that volatility exponentially. We are therefore talking about a very ’fast market’ which is naturally inconsistent. Following that precept, it is logical to say that in order to make a successful trade, a trader has to take into account technical and fundamental data and make an informed decision based on his perception of market sentiment and market expectation. Timing a trade correctly is probably the most important variable in trading successfully but invariably there will be times where a traders’ timing will be off. Don’t expect to generate returns on every trade.

Let’s enumerate what a trader needs to do in order to put the best chances for profitable trades on his side:


Trade with money you can afford to lose:
Trading fx markets is speculative and can result in loss, it is also exciting, exhilarating and can be addictive. The more you are ’involved with your money’ the harder it is to make a clear-headed decision. Money you have earned is precious, but money you need to survive should never be traded.

Identify the state of the market:
What is the market doing? Is it trending upwards, downwards, is it in a trading range. Is the trend strong or weak, did it begin long ago or does it look like a new trend that’s forming. Getting a clear picture of the market situation is laying the groundwork for a successful trade.

Determine what time frame you’re trading on:
Many traders get in the market without thinking when they would like to get out, after all the goal is to make money. This is true but when trading, one must extrapolate in his mind’s eye the movement that one expects to happen. Within this extrapolation, resides a price evolution during a certain period of time. Attached to this is the idea of exit price. The importance of this is to mentally put your trade in perspective and although it is clearly impossible to know exactly when you will exit the market, it is important to define from the outset if you’ll be ’scalping’ (trying to get a few points off the market) trading intra-day, or going longer term. This will also determine what chart period you’re looking at. If you trade many times a day, there’s no point basing your technical analysis on a daily graph, you’ll probably want to analyse 30 minute or hour graphs. Additionally it is important to know the different time periods when various financial centers enter and exit the market as this creates more or less volatility and liquidity and can influence market movements.

Time your trade:
You can be right about a potential market movement but be too early or too late when you enter the trade. Timing considerations are twofold, an expected market figure like CPI, retail sales or a federal reserve decision can consolidate a movement that’s already underway. Timing your move means knowing what’s expected and taking into account all considerations before trading. Technical analysis can help you identify when and at what price a move may occur. We will look at technical analysis in more detail later.

If in doubt, stay out:
If you’re unsure about a trade and find you’re hesitating, stay on the sidelines.

Trade logical transaction sizes:
Margin trading allows the fx trader a very large amount of leverage, trading at full margin capacity (in ACM’s case 1% or 0.5%) can make for some very large profits or losses on an account. Scaling your trades so that you may re-enter the market or make transactions on other currencies is generally wiser. In short, don’t trade amounts that can potentially wipe you out and don’t put all your eggs in one basket. ACM offers the same rates regardless of transaction sizes so a customer has nothing to lose by starting small.

Gauge market sentiment:
Market sentiment is what most of the market is perceived to be feeling about the market and therefore what it is doing or will do. This is basically about trend. You may have heard the term ’the trend is your friend’, this basically means that if you’re in the right direction with a strong trend you will make successful trades. This of course is very simplistic, a trend is capable of reversal at any time. Technical and fundamental data can indicate however if the trend has begun long ago and if it is strong or weak.

Market expectation:
Market expectation relates to what most people are expecting as far as upcoming news is concerned. If people are expecting an interest rate to rise and it does, then there usually will not be much of a movement because the information will already have been ’discounted’ by the market, alternatively if the adverse happens, markets will usually react violently.


Use what other traders use:
In a perfect world, every trader would be looking at a 14 day RSI and making trading decisions based on that. If that was the case, when RSI would go under the 30 level, everyone would buy and by consequence the price would rise. Needless to say, the world is not perfect and not all market participants follow the same technical indicators, draw the same trendlines and identify the same support & resistance levels. The great diversity of opinions and techniques used translates directly into price diversity. Traders however have a tendency to use a limited variety of technical tools. The most common are 9 and 14 day RSI, obvious trendlines and support levels, fibonnacci retracement, MACD and 9, 20 & 40 day exponential moving averages. The closer you get to what most traders are looking at, the more precise your estimations will be. The reason for this is simple arithmetic, larger numbers of buyers than sellers at a certain price will move the market up from that price and vice-versa.

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Successful Forex Trading

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Forex trading is fast becoming one of the easiest ways to earn large amounts of money on your investment. Then again, it can also be the easiest way to lose all of your money in a short period of time. That is, if you do not know what you are doing. The fact is that even seasoned traders make mistakes and only through the understanding of basic principles and the application of sound strategies can you be assured of earning money in the long run.One of the most basic things that you have to understand about Forex trading is that there will always be losing streaks along with the winning ones. Having this fact in mind will keep you going during those times that you do not get a good deal. The best way to handle Forex trading is to have a reliable trading system coupled with a rigid money management system.There are many different strategies employed in Forex trading today. What you should do is either adopt one of them or come up with your own. No matter which path you choose to take, the important thing is that your trading system has been proven or can be proven to be reliable. How would you know that your trading system is reliable?It is quite simple, really. A reliable trading system is one which gives you more winning trades than losing ones. More than this, your winning trades should be – in general – of greater value than your losing trades. You do not need to be a rocket scientist to figure this one out. More wins with greater value equals profits. No matter how you come up with your trading system, the bottom line is that you get consistent results.Once you have come up with your trading strategy, try it out first. You can do this by using a demo account before trading live. Using a demo account is advantageous as you will be doing exactly the same thing as live trading – without real money. This way, you can test your strategy and pick out the flaws f there are any.If, after you have tested your strategy, you are confident that you are getting consistent results, you could go live. Your strategy should not stop there, though. Once you engage in live trading, you must take care to instill strict discipline when it comes to money management. Do not deviate from your strategy once it is put in place. This is perhaps the foremost reason for traders to suddenly lose everything. Always remember that you cannot win all the time and that losses are part of trading. If you have a strategy in place, do not scramble to recoup your losses outside the boundaries of your strategy. The trend is that winning will come soon after your losses.One rule you should stick to is never trading with more than 2% of your account at risk on a single trade. Whether you win or lose, this percentage is going to get you the long term results that you are aiming for.

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Understanding the Basics of Currency Trading

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Investors and traders around the world are looking to the Forex market as a new speculation opportunity. But, how are transactions conducted in the Forex market? Or, what are the basics of Forex Trading? Before adventuring in the Forex market we need to make sure we understand the it, otherwise we will find ourselves lost where we less expected. This is what this article is aimed to, to understand the basics of currency trading.What is traded in the Forex market? The instrument traded by Forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another. The most traded currency pairs are:USD/CHF: Swiss francGBP/USD: PoundUSD/CAD: Canadian dollarUSD/JPY: YenEUR/USD: EuroAUD/USD: AussieThese six currency pairs generate up to 85% of the overall volume in the Forex market. So, for instance, if a trader goes long on the Euro, she or he is simultaneously buying the EUR and selling the USD. If the same trader goes short or sells the Aussie, she or he is simultaneously selling the AUD and buying the USD.The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency. Each currency pair is expressed in units of the counter currency needed to get one unit of the base currency. If the price or quote of the EUR/USD is 1.2545, it means that 1.2545 US dollars are needed to get one EUR.Bid/Ask SpreadAll currency pairs are commonly quoted with a bid and ask price. The bid (always lower than the ask) is the price your broker is willing to buy at, thus the trader should sell at this price. The ask is the price your broker is willing to sell at, thus the trader should buy at this price.EUR/USD 1.2645/48 or 1.2645/8The bid price is 1.2645The ask price is 1.2648A Pip A pip is the minimum incremental move a currency pair can make. A pip stands for price interest point. A move in the EUR/USD from 1.2545 to 1.2560 equals 15 pips. And a move in the USD/JPY from 112.35 to 113.40 equals 105 pips.Margin Trading (leverage) In contrast with other financial markets where you require the full deposit of the amount traded, in the Forex market you require only a margin deposit. The rest will be granted by your broker.The leverage provided by some brokers goes up to 400:1. This means that you require only 1/400 or .25% in balance to open a position (plus the floating gains/losses.) Most brokers offer 100:1, where every trader requires 1% in balance to open a position.The standard lot size in the Forex market is $100,000 USD.For instance, a trader wants to get long one lot in EUR/USD and he or she is using 100:1 leverage.To open such position, he or she requires 1% in balance or $1,000 USD.Of course it is not advisable to open a position with such limited funds in our trading balance. If the trade goes against our trader, the position is to be closed by the broker. This takes us to our next important term.Margin Call A margin call occurs when the balance of the trading account falls below the maintenance margin (capital required to open one position, 1% when the leverage used is 100:1, 2% when leverage used is 50:1, and so on.) At this moment, the broker sells off (or buys back in the case of short positions) all your trades, leaving the trader "theoretically" with the maintenance margin.Most of the time margin calls occur when money management is not properly applied.How are the mechanics of a Forex trade? The trader, after an extensive analysis, decides there is a higher probability of the British pound to go up. He or she decides to go long risking 30 pips and having a target (reward) of 60 pips. If the market goes against our trader he/she will lose 30 pips, on the other hand, if the market goes in the intended way, he or she will gain 60 pips. The actual quote for the pound is 1.8524/27, 4 pips spread. Our trader gets long at 1.8530 (ask). By the time the market gets to either our target (called take profit order) or our risk point (called stop loss level) we will have to sell it at the bid price (the price our broker is willing to buy our position back.) In order to make 40 pips, our take profit level should be placed at 1.8590 (bid price.) If our target gets hit, the market ran 64 pips (60 pips plus the 4 pip spread.) If our stop loss level is hit, the market ran 30 pips against us.It’s very important to understand every aspect of forex trading. Start first from the very basic concepts, then move on to more complex issues such as Forex trading systems, trading psychology, trade and risk management, and so on. And make sure you master every single aspect before adventuring in a live trading account.

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The History of Forex Trading

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Many centuries ago, the value of goods were expressed in terms of other goods. This sort of economics was based on the barter system between individuals. The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value.Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today’s modern currencies.Before the first World war, most Central banks supported their currencies with convertibility to gold. Paper money could always be exchanged for gold. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability.In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.Near the end of WWII, The Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis.The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960’s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970’s following president Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.The last few decades have seen foreign exchange trading develop into the worlds largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.In Europe, the idea of fixed exchange rates had by no means died. The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when built-up economic pressures forced devaluations of a number of weak European currencies. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002.Today, Europe has embraced the Euro in 12 participating countries. The physical introduction of the Euro on January 1, 2002 saw the old countries currencies made obsolete on July 1, 2002.In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable.While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The size of the FOREX market now dwarfs any other investment market.It is estimated that more than USD 1,200 Billion are traded every day, that is the same amount as almost 40 times the daily USD volume on the American NASDAQ market.

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Stop-Loss discipline

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There are significant opportunities and of course risks in the foreign exchange markets. Aggressive traders might experience profit/loss swings of 20-30% daily. This calls for strict self-disciplined stop-loss policies in positions that are moving against you.
Luckily, there are no daily limits on foreign exchange trading and no restrictions on trading hours other than the weekends. This means that there will nearly always be a possibility to react to moves in the main currency markets and low risk of getting caught without possibility of getting out. This market can move very fast and a stop-loss order is by no means a guarantee of getting out at the desired level. The main risk is really an event over the weekend, where all markets are closed. This happens from time to time as many important political events such as G10 meetings are normally scheduled for week The main risk is really an event over the weekend, where all markets are closed. This happens from time to time as many important political events such as G-20 meetings are normally scheduled during the weekend.

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Spot and forward trading-Swaps

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When you trade foreign exchange you are always quoted a spot price valued 2 business days in advance. This is under normal conditions where there are no bank holidays in the traded currencies countries or is not over a weekend. If you trade on Monday it is valued Wednesday. If you trade on Friday it is valued Tuesday.
Forward trading is making the opposite trade of a spot trade in a given period of time. Often investors will swap their trades forward for anywhere from a week or two up to several months depending on the time frame of the investment. Most common is one-day rollovers, keeping a spot position overnight. These overnight positions are technically one-day forwards. It is very important to know what interest you paying if short and what interest you are receiving if long when keeping an overnight position. Even though a forward trade is on a future date, the position can be closed out at any time. The closing part of the position is then swapped forward to the same future value date.

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Spreads not Commissions

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When trading foreign exchange, you are always quoted a 2-sided dealing price where you can buy or sell the trade currency. The difference between the buy and sell price is the spread
The dealing spread is typically around 5 basis points or pips under normal market conditions, e.g. EUR/USD 1.2250-55. This means that you can sell Euros against US Dollars at 1.2250 and buy Euros at 1.2255. There are no more costs, no commissions or exchange fees because so called commissions are built into the spreads. The wider the spread the bigger the commission!

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24/5 and No Central Location

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The FOREX Market has no fixed location. It is a market based on the vast network of hundreds of major banks and their branch offices across the globe. The liquidity is always there because someone, somewhere can make a price. From Monday morning in New Zealand to Friday afternoon on the California Coast the FOREX Market is basically a 24 hour 5 day a week market that does not stop. Australasia starts a day then comes the Asian market, then Europe, followed by the American and Canadian markets then Australasia again and the cycle continues with the markets closed only on the weekends or in countries with bank or national Holidays.

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Trade Currency and Price Currency

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When you trade, you will always trade a combination of two currencies. For example, you will buy US dollars and sell Japanese Yen or buy Euros and sell Japanese Yen. There are many combinations of the dozens of widely traded currencies. There is always a long (bought) and a short (sold) side to each trade. This means that you are speculating in the prospect of one of the currencies strengthening and one of them weakening.
The trade currency or dealt currency is normally, but not always, the currency with the highest value. When for example trading US dollars against Japanese Yen, the normal way to trade is buying or selling a fixed amount of US dollars, USD 100,000. When closing the position, the opposite trade is done, again USD 100,000. The profit or loss based on price change will be apparent in the amount of Yen credited and debited for the two transactions. In other words, your profit or loss will be denominated in Japanese Yen that are known as the price currency.

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Margin Trading

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Foreign exchange trading is normally undertaken on the basis of margin trading or gearing. A relatively small deposit is required in order to control much larger positions in the market. This is possible because when you buy one currency you sell another. Margin requirements are set by your Customer broker and vary from as little as 1% to 10% margin. This means that in order to trade 1,000,000 USD on 1 % margin, you need to place just 10,000 USD by way of security. That same security of 10,000 USD, traded on a 10% margin could control up to 100,000 USD worth of one currency against another currency.
As you can see, with gearing your capital from 10 to 100 times calls for a very disciplined approach to trading as both profit opportunities and potential loss are equal and opposite.

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What is the FOREX Market

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The Foreign Exchange (FOREX) market is by far the largest market in the world. The $1.3 trillion average daily turnover dwarfs the daily turnover of the American stock and bond markets combined. There are many reasons for the popularity of foreign exchange trading, but among the most important is the available margin trading, the 24-hour a day 5 day a week liquidity, and low if any commissions.
Of course many commercial organizations are participating purely due to the currency exposures created by their financial institutions accounts on their import and export activities. Investing in foreign exchange remains predominantly a domain of the big professional players in the market such as hedge funds, banks and brokers. Nevertheless, any investor with the necessary knowledge is and complete understanding of this market can benefit from this exciting arena.

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The History of Forex Trading

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Many centuries ago, the value of goods were expressed in terms of other goods. This sort of economics was based on the barter system between individuals. The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value.Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today’s modern currencies.Before the first World war, most Central banks supported their currencies with convertibility to gold. Paper money could always be exchanged for gold. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability.In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.Near the end of WWII, The Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis.The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960’s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970’s following president Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.The last few decades have seen foreign exchange trading develop into the worlds largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.In Europe, the idea of fixed exchange rates had by no means died. The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when built-up economic pressures forced devaluations of a number of weak European currencies. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002.Today, Europe has embraced the Euro in 12 participating countries. The physical introduction of the Euro on January 1, 2002 saw the old countries currencies made obsolete on July 1, 2002.In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable.While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The size of the FOREX market now dwarfs any other investment market.It is estimated that more than USD 1,200 Billion are traded every day, that is the same amount as almost 40 times the daily USD volume on the American NASDAQ market.

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