The Essential Guide to
Foreign Exchange Trading

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Background and History

The foreign exchange markets are not new. They’ve been around for as long as banks have been doing business. What is new is the accessibility of these markets to the private investor.

Foreign exchange markets were originally developed to cater for the supply and demand for different currencies by governments, companies and individuals. They exist to service international trade and the international movement of money and capital. This has not changed.

However, today an enormous proportion of Forex market activity is being driven by speculation, arbitrage and professional dealing, in which currencies are traded just like shares.

Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971.

In the 1980s, the advent of computers and technology made it much easier to move currencies across international markets. Transactions in foreign exchange rocketed from about $70 billion USD a day in the 1980s, to an estimated $1200 billion USD a day.

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