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Fascinating Facts About Forex Trading That You Did Not Know Of

Fascinating Facts About Forex Trading That You Did Not Know Of

What is Forex to you? An adventure? A means of livelihood? A challenge? A hobby? Or even a routine job? Whatever it is, trading can be fascinating, so long you are not losing money. It goes without saying that the industry is one of the easiest, yet most difficult ways of making money all over the world. However, there are some fascinating facts that you probably did not know about the market that never sleeps.

Think you are aware of all that needs to be known as far as forex trading is concerned? Here are some facts that will make you think again!

Currency exchange is historical

Many people think of currency markets as relatively new inventions that sprung up with the advent of technology and got spread through education and the internet. However, currency exchange can be traced as far back as the biblical times. It has deep roots in history and only evolved with time. In fact, money changers were first mentioned in the Talmud, also known as the biblical times. The money changers changed currencies for people, and took a few or commission for themselves, of course. The difference is the crude, primitive method used, and the need for personal engagements, unlike in the present day, when all you need is a mobile device and the internet.

GBP/USD Currency pair is known as The Cable

The two most exchanged and transacted currencies in forex trading are the Great Britain Pound (GBP) and United States Dollars (USD). But as a trader, you probably didn’t know that the pair is called the cable. The reason the pair is called the cable is because before the advent of satellites and fiber optic cables, the London and New York Stock exchanges were synchronized by, and had to run through a gigantic steel cable that was passed under the Atlantic. You probably can’t imagine what brokers’ execution speed was like in the 1800s.

Traders are referred to as Bull and Bear

Another interesting fact about forex is the way traders are categorized. The Bulls are the optimistic ones that believe the market will go up at a particular time, while a Bear is a trader that believes price will fall. Apparently, these nicks are ascribed to the characteristics of the said animals – when a bull strikes, it does with its horns using upwards motion, as opposed to a bear, which slashes with its claws and moves them downwards. Moreover, there is an uncommon type of trader, called the Pig, who is not sure of what s/he is going to do next. However, the general belief amongst traders is that the Bulls and Bears make money, but Pigs get slaughtered eventually.

The US is not the center of Forex Trading

Most FX transactions, especially maximum transactions, involve the US dollar. In fact, it is the most used currency in trading due to its worldwide acceptability as a legal tender – it is involved in 87% of all trades. So, most traders automatically adopt the US as the center for trading. This is not true! According to research, 41% of all forex transactions occur in the UK, while only 19% takes place in the US. It is safe to say that the London is the largest forex hub in the world; followed by New York, and then Singapore.

Germany has the largest global forex player

It is amusing that despite Germany being a relatively small forex market, Deutsche Bank, a German bank, is the largest single forex player in the world, with a 14.6 market share. Citibank (USA) is a close second, at 12.3%, while Barclays (UK), is third, at 11%. Surprised?

Daily Turnover for the FX Market is 5.3 Trillion Dollars

Yes, you read that right! An average 5.3 Trillion dollars are traded on the foreign exchange market each day. Trading daily volume is about 53 times more than the New York Stock Exchange and is equal to 4 times the GDP of the world at large. A whopping 2.2 trillion dollars out of this is in the form of FX swaps, and about 2 trillion dollars in spot. With this sort of money, you can afford to build houses and buy very decent cars for every household in America if you wish.

Forex used to be restricted to banks and big companies

With a required minimum sum of $40 million to $60 million in liquid funds, only banks and very big firms could trade in the exchange market circa the mid-90s. But today, individuals now trade all over the world to trade with as “little” as $1,000 as first deposit. Thanks to the arrival of the internet and numerous online platforms that have opened the market to more individuals and retail traders. I honestly don’t think anyone with $40 million will even trade. If we all had that sort of money, we most probably wouldn’t.

The internet has made forex more popular and accessible

The internet has revamped forex trading. In the past, majority of forex transactions took place on the exchange floors, but many modern traders don’t even know this because they have never traded outside various online platforms. On the one hand, the market has now been made accessible to anyone in the world, no matter the location they find themselves; they just need an internet connection and they are good to go. On the other hand, more individual traders and retailers are becoming a part of the system due to easy accessibility.

The Modern Forex Market started in 1973

As stated earlier, Forex trading dates back to a long time before most of us were born, however, modern forex trading did not start until 1973. This was after the post-WWII Bretton Woods accord broke down, and subsequently brought an end to controlled exchange rates. The ancient Forex markets were compelled to a close in 1973 due to the ineffectiveness of this accord. Hence, the beginning of the new era of floating currencies – and Market Markers deciding exchange rates – that we are currently in.

 

 

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