Pipsqueaks number 35: Forex Fun Facts

Trading is a busy, complex, sometimes trying, and often frustrating occupation / pastime. Sometimes we get so deep into the subject of trading, we tend to forget what it is we are trading. I thought it would be fun to look at some interesting factoids about currency exchanges.

While currency exchanging literally goes back centuries (remember Jesus driving the moneychangers out of the temple?), Our modern Forex market has its roots in the middle of the 19th century with the firm of Alexander Brown and sons, who traded foreign currencies circa 1850. Later in the 19th century, holdings in foreign-exchange currencies outpaced those of gold 10% versus 6%, which underscored the growing importance of the emerging Forex markets. Much of the foreign-exchange market was traded against the British pound sterling, which, by 1913, accounted for nearly half of the entire global foreign-exchange market.Pipsqueaks 35 Forex Fun Facts

During the period following the first world war, the foreign-exchange markets started to become dominated by certain family groups, most notably the Kleinwort family, as well as the Japhets, S,Montagu & Co. and Seligmans. Following the second world war, the Bretton Woods agreement positioned the dollar to be the global reserve currency, and set the price of gold at $35 an ounce; this was done with the intention of providing the world with much-needed currency stability. This was brought to an end in August of 1971 by Richard Nixon, who broke convertibility of the US dollar to gold, making it a 100% fiat currency, which led to a free-floating currency exchange system.

In the early 1970s computers replaced the telex and telephone as a mechanism for placing trading quotes. By the 1980s (still very much a pre-Internet period), Reuters developed a form of electronic Forex trading which was aptly called “Reuters dealing”. Passé by modern standards, it was, at the time, very much state-of-the-art. It was essentially an electronic “chat” system that ultimately was replaced by the Internet we know and love today.

Of all the currencies traded in the global Forex market today, the most popular is the US dollar, which accounts for nearly 90% of all trading. Before retail Internet-based Forex trading hit the scene, the Forex market was limited to large banks and corporations that could handle the 40 to 50 million required reserve liquidity in order to facilitate trading. Aren’t we lucky the Internet came along? In the Forex market is the largest of all global markets, with the volume of over $5 trillion traded each and every trading day. It’s a market that never sleeps, that is, you can trade 24 hours a day, with only the weekend as respite. And unlike equities (the stock market), the Forex market can be thought of as being “crisis free”. In fact, a crisis, or some worthy news event can stimulate Forex market movement, as traders can make money is easily “up” as “down”, as all that’s needed is movement, unlike other markets that require “growth”.

And speaking of growth, a great way to grow as a trader is to get exposed to a trading group that can afford you such things as mentoring, trade signals, tutorials, learning materials, expert advisors, and more. A great resource for these things Sapphire membership in the Slick Trade Academy. So if you been thinking about joining a trading group, I think you should seriously consider giving Slick Trade a try. I think you’ll be glad you did.

Now I have to admit that my articles been a little sparse of late – I’m the process of a cross-country move and need to get readjusted to all kinds of things. But I think I have now have an advantage I didn’t have before, as I’m now on New York time and don’t have to get up super early to trade New York open anymore! I’ll have to see have this helps improve my trading in the weeks to come. In the meantime have a great week and good luck in the market!

JC

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