FOREX

What is Forex (Foreign Exchange) ?

Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.

Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.

MG Financial, now operating in over 100 countries, serves all manner of clients, comprising speculators and strategic traders. Whether it’s day-traders looking for short-term gains, or fund managers wanting to hedge their non-US assets, MG's DealStation™ allows them to participate in FOREX trading by providing a combination of live quotes, Real-Time charts, and news and analysis that attracts traders with an orientation towards fundamental and/or technical analysis.

Forex History - The Evolution OF FX Markets

he Gold Exchange and the Bretton Woods Agreement

In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, who had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit. The bank’s refusal to grant the loan was 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 fleeing across nations, and restricting speculation in the world currencies. Prior to the Agreement, the gold exchange standard--prevailing between 1876 and World War I--dominated the international economic system. Under the gold exchange, currencies gained a new phase of stability as they were backed by the price of gold. It abolished the age-old practice used by kings and rulers of arbitrarily debasing money and triggering inflation.

But the gold exchange standard didn’t lack faults. As an economy strengthened, it would import heavily from abroad until it ran down its gold reserves required to back its money; consequently, the money supply would shrink, interest rates rose and economic activity slowed to the extent of recession. Ultimately, prices of goods had hit bottom, appearing attractive to other nations, who would rush into buying sprees that injected the economy with gold until it increased its money supply, and drive down interest rates and recreate wealth into the economy. Such boom-bust patterns prevailed throughout the gold standard until the outbreak of World War I interrupted trade flows and the free movement of gold.

After the Wars, the Bretton Woods Agreement was founded, where participating countries agreed to try and maintain the value of their currency with a narrow margin against the dollar and a corresponding rate of gold as needed. Countries were prohibited from devaluing their currencies to their trade advantage and were only allowed to do so for devaluations of less than 10%. Into the 1950s, the ever-expanding volume of international trade led to massive movements of capital generated by post-war construction. That destabilized foreign exchange rates as setup in Bretton Woods.

The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations floated more freely, as they were controlled mainly by the forces of supply and demand. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization.

In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s, to more than $1.5 trillion a day two decades later.

The Explosion of the Euromarket

A major catalyst to the acceleration of Forex trading was the rapid development of the eurodollar market; where US dollars are deposited in banks outside the US. Similarly, Euromarkets are those where assets are deposited outside the currency of origin. The Eurodollar market first came into being in the 1950s when Russia’s oil revenue-- all in dollars -- was deposited outside the US in fear of being frozen by US regulators. That gave rise to a vast offshore pool of dollars outside the control of US authorities. The US government imposed laws to restrict dollar lending to foreigners. Euromarkets were particularly attractive because they had far less regulations and offered higher yields. From the late 1980s onwards, US companies began to borrow offshore, finding Euromarkets a beneficial center for holding excess liquidity, providing short-term loans and financing imports and exports.

London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. London’s convenient geographical location (operating during Asian and American markets) is also instrumental in preserving its dominance in the Euromarket.

Advantages and disadvantages of the use of Forex Robots

People always read and read lots of articles and several pages of information that most of the time lead to no conclusion, or to be more specific, simply lead to nothing. So what I’m gonna do is focus all these well and bad, but still useful, written information about Forex Robots to bring my readers what I think are the most relevant, nice and ugly, things about these controversial systems, called Forex Robots.

I’ll start by pointing out the disadvantages of the use of Forex Robot:


1.They could be very expensive.
2.There’s a huge range of different robots to choose from, which can make users to have a really hard time choosing the one that’s right for them.
3.People have to leave their computer turned on all day or pay for a VPS (Virtual Private Server) so that the robot works at its best performance.
4.Doesn’t run on every broker, which could limit your earnings.
5.Configuring the robot for its best performance could be problematic and depends on what currency pair the user is trading.
6.Intervene in the robot’s performance may cause its malfunction and turn into losses for the user.
7.Most of them can’t trade on days of high volatility.

After looking at this horrifying number of bad things about robots, let’s take a look to the advantages they have to offer:


1.There’s no need to know anything about the Forex Market (although this is not recommended at all).
2.Because it is a software, the robot can trade 24/5 which keeps you away from missing good trades.
3.Can be used in more than one account at the same time (Multi-trade).
4.Almost every parameter can be configured depending on the robot (from starting investment to stop loss and more).
5.Can trade with every currency pair depending on the robot.
6.Most of them can be tested and returned the first 2 months.
7.Forex Robots base their decisions on math and statistics, not feelings.

At this point, the numbers are even, but by reading both, advantages and disadvantages, carefully it can be seen that it’s not numbers what matter, it’s the strong of what they can and can’t offer, so the conclusion is up to you. I’ll finish this article by recommending the use of Forex Robot, particularly this one: FAP Turbo (We actually use this Forex robot making a good amount of profits. This robot have one year in the market making profits.); and for those that refuse to use these impressive systems they can always learn to do this job by themselves like pros, and one step to do it is by joining HectorTrader Forex Course.

Reasons why invest in the Forex Market

In recent years, investors of all categories and all countries have dramatically increased their participation in the currency markets. Why? Here’s a summary of the 8, plus an additional, reasons why investors are so attracted to the Forex market:

Reason #1: The world’s most liquid market

The Forex market can absorb such huge transaction volumes that the ability of any other financial market is negligible when compared with this market. In other markets like the stock market, low liquidity of some actions causes investors often have to liquidate their positions at an unwanted price. On the contrary, in the Forex market exists such high liquidity that investors have the possibility to open or close orders any time they want at whichever price they want.

Reason #2: Transparent market

Given the multimillion-dollar negotiation that takes place every day in the currency markets, it is virtually impossible to manipulate the market. This makes Forex a secure market for professional racers.

Reason #3: Continued negotiation market

Something that’s fascinating to participants in the Forex market is its 24 hours nature. There’s no schedule for opening or closing; Investors can operate during a run time of 24/5.

Reason #4: Market without forced deadlines

Participants from other financial markets are constrained by having to adhere to a particular horizon in time. In the Forex market, however, a position can remain open as long as the investor deems necessary.

Reason #5: Market without implementation costs

Historically, the Forex market has not received commissions for services, except for a natural difference between the buying and selling (spread rate).

Reason #6: Market identifiable trends

For various historical periods, currencies have shown substantial and identifiable trends. The fact that each individual currency offers a historical pattern of well-defined trend, facilitates the establishment of strategies for profitable capital.

Reason #7: Market of dual direction

Unlike other financial markets, the Forex market is one of two directions. That is, investors can earn either when the market rises or fall.

Reason #8: Leveraged Market

This allow Forex participants to control much larger amounts of capital with just a little investment. The leverage regularly offered is of 1:100.

Additional Reason: Automated Trading Software (FX Robots)

FX Robots are automated trading systems that facilitate the job for people that uses them. They just need to be configured and they’ll start trading based on market trends analysis, statistics and mathematics. FX Robots are extremely accurate and they can be used as primary income (mostly for newcomers to the Forex market) or as models to follow or to check decisions.