WHAT IS FOREX?

 

Forex (Forex, Foreign Exchange – «foreign exchange”) – the inter-bank currency exchange market. Forex word is commonly used to describe the foreign exchange market.

Forex is an international inter-bank market. Operations are conducted through institutional systems, for example: central banks, commercial banks, investment banks, brokers and dealers, pension funds, insurance companies, multinational corporations, and so on.

August 15, 1971, US President Richard Nixon announced his decision to cancel the free exchange of the dollar into gold (abandoned the gold standard), given by that act a final termination of the Bretton Woods agreements (according to which the dollar backed by gold, and other currencies by the dollar). Replaced by a Jamaican currency system, the principles of which were laid in March 1971 on the island of Jamaica with the participation of 20 most developed states of the non-communistic-block. While earlier exchange rates were stable following the gold standard, after the latest changes, a floating rate of gold led to the inevitable fluctuations in exchange rates between the different currencies. This new reality presented a creation of the relatively new field of activity – currency trade when the exchange rate began to depend not only on the gold currency but also on market’s supply and demand ratio.

These days, the average daily turnover in the forex market is about 5-7 trillion dollars. By 2020, a further increase of intraday turnover within the Forex market may reach 10 trillion dollars. In fact, it makes the FOREX market is the most liquid market in the world.

The majority of the Forex brokers implement the principle of in-house (internal) clearing transactions (some call it “kitchen” trading). In this case, dealing desk centre or a brokerage company acts the opposite side and taking the risk in self-handling its customer earnings instead of executing the trades within the real financial exchange market. This approach produces a direct conflict of interest between the brokerage company and the customer.

In countries lacking proper Forex regulations, or the existing available rules are being weak, thousands and millions of customers have become victims of scams. For example, In a certain countries, where the regulation is pretty much absent, this creates for many individuals to see in the FOREX as an equivalent to the word “scam”.

In fact, such a global macro-economic system as the international currency market (FOREX) created a huge number of myths and rumours.

Indeed, becoming a victim as a user inside the global forex industry is very easy if you do not have enough knowledge. The next edition of articles «InvestLike.Pro» will share with you a personal experience, and reveal the important secrets of how to protect yourself within the market and what should be avoided…

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