History of currencies trading
The first currencies brokers came on stage in the mid 70's to offset a significant customer foreign exchange business for medium and small banks, which needed continuous exchange rates in the major currencies.
Initially, the foreign exchange brokers installed direct lines to all the banks willing to participate. Generally, a major bank made a rate and the brokers showed the rate to all the banks at about the same time. The first bank to deal on the rate completed a transaction. The others waited for the next rate. Any bank could make a rate - show a bid or an offer. Soon, with the aid of new technologies, the brokers became quite sophisticated and efficient at putting together a continuous two-way price and using the banks as their primary liquidity providers. Beside currencies, numerous other CFD products came into the online trading market.
Exchange trading has no fixed terms and guarantees which makes liquidity and the possibility of acting at any time its central characteristics. Then there is also a high level of volatility, and most of all transparency.
As a prime example, currrencies exchange trading actually has the highest turnover of any market segment. Daily global turnover is estimated at a massive approximative three trillion US dollars. Then there is the inter-bank trade with foreign currencies and interest rate derivatives with an additional approximative two trillion US dollars in daily turnover, and the trend is still expanding. In addition and according to the Bank for International Settlements in Basel, Switzerland, foreign exchange trading revenues is rising constantly and yearly. However, it is not merely the high liquidity levels that foreign exchange traders see as a benefit. As opposed to certificates, regular stocks or funds, there are no fees involved in foreign currency trading. Normally and depending on the bank/broker, only the spreads between the purchase and sales price need to be paid. In addition, trading is possible practically around the clock. It is thus possible to act and react at any time. Due to the permanent fluctuations between currencies, it is possible to make substantial profits within a single trading day but it is also just as easy to suffer heavy losses.
Topics about currencies trading
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