A HISTORY OF THE FOREX

The FOREX (i.e., FOReign EXchange) market is an international market where the money (currency) of every country is sold and bought freely. It was launched in the 1970s at the moment of introduction of free exchange rates, and the price of one currency against another that occurs from supply and demand is determined only by market participants.


There is no external control, and competition is free because all the participants can decide to transact or not. In this respect, the FOREX is a perfect market because it can’t be controlled or monopolized by any of its participants. The enormous number of transactions executed day after day in a continuous activity make it the biggest liquid financial market. According to various assessments, money masses in the market constitute up to US $4.5 trillion a day.


Trading is conducted all over the world through telecommunications and electronic networks 24 hours a day, 5 days a week starting from 00:00 Greenwich Mean Time (GMT) on Monday (some starting a little earlier) to 10:00 p.m. GMT on Friday (some closing a little later). There are dealers quoting currencies in every time zone through

the main central markets: Frankfurt, London, New York, Tokyo, Hong Kong, Australia, New Zealand, etc.

To get a better understanding of FOREX quotes, you just have to know that one unit of
the base currency is equivalent to the exchange rate in the quote currency. For example,
if EUR/USD is trading at 1.2762, the price of 1 euro (base currency) in dollars (quote

currency) will be 1.2762 dollars.


FOREX trading is conducted through individual contracts. The standard contract size (also called a lot) is usually 100,000 units. This means that for every standard contract you acquire, you are controlling 100,000 units of the base currency. For this contract

size, each pip (the smallest price increment) is worth $10. Many companies offer mini accounts in which you can trade units of 10,000, where the pip value is $1 or even smaller.


In comparison with other markets, trading the FOREX market allows very low margin requirements because of leverage. In FOREX, you don’t need to obligatorily buy a currency first in order to sell it later. It is possible to open positions for buying and selling any currency without actually having it at hand: For a standard account size,

usually Internet brokers establish a minimum deposit such as $2000 for trading in the FOREX market and grant a leverage of 1:100. That is, opening the position at $100,000, a trader invests $1000 and receives $99,000 as a credit.



The FOREX is able to maintain its objectivity and avoid being controlled or manipulated by one or few of its participants because the volume transacted is so high that if any of them would want to do so, by changing prices at will, they would have to operate with tens of billions of dollars. This is the reason why the FOREX can’t be influenced by any single participant, and even though there are situations where a huge transaction can seem to take control of the market for a few moments, the balance is established again almost immediately because of the great liquidity involved. This also allows traders to get a profit by opening and closing positions within a few seconds.



The FOREX market is always moving. You can chose to maintain a position for a very short time or for longer periods, even years; it will depend only on your own trading strategies.

In the FOREX, it is possible to perform speculative activities without the need for a real money supply. This is referred to as marginal trading. The amount required as a guarantee for the transaction is low, thus providing an opportunity to open positions with a small account in U.S. dollars (some local brokers also accept some of the main currencies, such as the euro, pound sterling, Japanese yen, etc.) and buy or sell a lot of other different currencies.