The history of the forex market
At the end of World War II, the whole world was experiencing total chaos. In this regard, the main Western governments decided that there is an urgent need to create a system of economic stabilization. There was even developed the "Bretton Woods system", which established the exchange rate of all currencies in relation to gold. For a while this stabilized the situation, however, taking into account the rapidly changing economies of different countries, the system lost its effectiveness. As a result, another currency assessment system was created.
In the process of reconstruction after the war, the United States took one of the leading positions on the state of world economy, as a result of which the currency market turned into a free floating one, and the exchange rates there were determined by supply and demand. At first, it was difficult to determine fair exchange rates. However, after the 1990s, thanks to computer geniuses and a rapidly developing Internet, banks began to actively create their own trading platforms, where traders could independently enter into transactions.
In parallel with this, some companies also presented their online trading platforms for individual traders. These were "retail forex brokers" who introduced the practice of trading in parts, making available smaller amounts of trade, unlike the interbank market. As we understand, with the course of history, they became brokers, now providing their services for online currency trading.
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Retail Forex Brokers
Previously, only large speculators and investment funds could trade in currency, now this option is available to anyone who wants to make the first deposit. Thanks to sound competition in the market, any trader can pick up favorable conditions for himself and start trading at any time. In addition, you can open and liquidate transactions without leaving your home, being anywhere in the world, because Forex is an electronic trading system, and these rules do not depend on the broker with whom you decided to work.
Brokers are basically of two types:
• Market-makers, as their name suggests, "make" or set their own rates and request prices independently;
• Electronic communication networks (ECN), which use the best prices for offers and prices available to them from various institutions in the interbank market. Simply put, these are trading platforms that automatically match the buyer's orders for purchase and sale at the stated prices. These stated prices are collected from various market makers, banks and even other traders who use ECN.
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- "Day Trading the Currency Market" by Kathy Lien
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