Thursday, April 12, 2007

Beginners FOREX – Trader comparisons in an historical sense.


“A foundation must be first laid…..It must receive the greatest care, and be made stronger than any other part.” James Allen


The Foreign Currency (FOREX ) market has no centralised physical location or central exchanger although London has the greatest amount of activity. London’s geographic location is fortuitous being between the Asian and American markets.

The process of foreign exchange (FOREX) is electronic through a network of banking systems with companies/corporations, financial institutions, brokers, dealers and individual traders executing currency exchanges.


FOREX is relatively new in its current form where individuals may trade alongside the large corporations. Forex was once a reserve only for the wealthy.

1971 was the pivotal year when exchange rates began their free float on the world stage. Some would disagree with me there citing the incident of 1967 in which, a Chicago bank refused a college professor, Milton Friedman a loan in pounds sterling because he had wanted to use the funds to short the British currency. He had reckoned sterling to be priced too high against the dollar, and wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thereby making a quick profit. The bank did not give him the loan due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold. The Bretton Woods Agreement, set up in 1944, aimed at installing international monetary stability by preventing money from escaping across the nations, and restricting speculation in the world currencies.

Currency trading (FOREX) continues to escalate in popularity and with the event of the internet new sites proliferate in this exciting but sometimes dangerous (to your pocket) form of earning. This is the new “Golden Goose”!

See the previous post and the quote above …foundation, foundation ……foundation.

Today FOREX , using leverage, allows the small, individual trader and even beginners to take their position alongside even the largest investment banks and corporations (scaled ….of course).

It would be good to read a little of the history of FOREIGN EXCHANGE.

You may do so at Wikipedia which gives a detailed description of the international economic system that kept control of the currencies in such a way as to set fixed exchange rates. HISTORY HERE

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