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Forex Currency Trading: The 1.5 Trillion Dollar Market
from: Gord Shin
Trading activities during early times commenced the conduct of different commercial activities, which lead to the development of early civilizations. Trade, as defined during our economics class way back in the secondary and collegiate years, is basically the exchange of goods or services at an approved exchange rate (for instance, you will trade 1 dozen of orange in exchange for a piece of silver coin).
Long before the money, which is now called the “trading medium” for most of the transactions today were introduced, trade is widely conducted and considered to be an integral part of the lives of people in early times. One of the recorded trading activities in history is the expedition that was dispatched by Queen Hapshetsut of Egypt from 1501-1479 B.C. in quest of valuable goods such as myrrh, gold, incense, ebony, and other valuable woods. The expedition arrived on Ethiopia, where the Puntites (the people living in the Ethiopian region), gladly traded their incense, ebony, and other valuable items in exchange for the animal skins, eggs, and several wild animals brought by the Egyptians.
The use of currency as a trading medium started after the rise of the renowned Aksumite Kingdom in northern Ethiopia. The kingdom realized the importance of trade for the growth of their commercial activities, thus it lead to the issuance of their own currency (the gold, silver, and bronze). From then on, currency is used for various trading activities in their commercial market.
Currency is the eminent trading medium of present commercial activities nowadays, although it does not lose its essence. In the same manner that you can trade silver coins and fruits, currencies can also be exchanged for one another as well. And that is what Forex currency trading is all about.
Forex currency trading is the largest financial market in the world, with over 1.5 trillion dollars in turnover daily. It involves purchasing and selling of a foreign currency for one another at an agreed exchange rate. The huge estimated turnover amount of the Forex market is due to the participation of various Forex traders from different countries around the world in the process and the conduct of the trading process (24 hours a day, 7 days a week) to accommodate all potential trades between different countries.
In addition, the tremendous turnover amount circulating in the Forex currency market is more than the combined turnover amount of the all the stock markets around the world (be it futures, forwards, or options), which leads to a very liquid market. When a market is said to be “liquid”, it does not have a fixed exchange, thus making it desirable for different individuals or entities to participate in Forex currency trading.
According to the Bank for International Settlements, 90 percent of different foreign currencies are traded against the United States’ Dollar. Other most-traded currencies are the Euro (37.6 percent), Japanese Yen (22.7 percent), Pound Sterling (13.2 percent), and the Swiss Franc (6.1 percent). Typically, the foreign currencies are traded in pairs and exchanged for another pair of currencies when traded within an agreed rate which is called the exchange rate. The rate varies according to the trading season, the volume of foreign currencies to be traded, and other eminent factors as well.
Given the huge tremendous turnover amount circulating in the market as well as the trading process, Forex currency exchange is said to be another golden opportunity to earn and take part to the market’s 1.5 trillion dollars worth of circulating turnovers.
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