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Introduction to the Foreign Exchange Market
With daily volumes of 4 trillion USD, the Foreign Exchange or Forex is the largest financial Market in the world. The Forex market operates as a decentralized network where the world's major currencies can be traded one against another, in a 24-hour basis, from Monday to Friday.
The Short History of the Modern Currency Market
After the end of World War II, the Bretton Woods Agreement (1944) became the basis of a new global monetary system. According to that agreement, the exchange value of a country’s currency was fixed and equal to a particular quantity of gold. Since the Bretton Woods Agreement ended, during the 70s, the current Floating Currency System has arisen. According to the modern Floating System, the value of every currency rises or falls according to the dynamics of demand and supply.
- In 1971, the CME (Chicago Mercantile Exchange) was the first exchange to offer currency trading within the International Monetary Market (IMM)
- After 1990, the revolution in Informational Technology provided the framework for a new fully-computerized Forex Market, the Online Forex Market
- Today there are many hundreds of Online Brokers offering access to the Foreign Exchange market. These brokerage firms are divided into three main categories:
(1) ECN Brokers (Non-Dealing-Desk)
(2) STP Brokers (Non-Dealing-Desk)
(3) Market Makers (Dealing-Desk)
