Thousands of years ago, when there was no cash money, there was only barter trading. Cheese was swapped for meat, leather was swapped for shoes and goats were exchanged for pigs. Within a geographical region, the exchange ratios for the common goods were known – everyone knew about what his assets were worth, even without that he could put a monetary value to them. Later precious metals such as gold and silver were introduced. These metals soon established themselves as universal exchange currencies, even in the time before silver and gold coins were invented. In contrast to animals or food products, these precious metals were easy to transport, were always of the same quality and did not become older or spoil.
Later coins were added. They had the cast-on value, but if necessary they could also be melted down and still kept at least the value of the metal they were produced of. With the emergence of stable political conditions, paper money was introduced, the basis of modern currencies. Paper money was much cheaper in production than gold or silver coins. Because it became widely accepted and because its value was guaranteed be the state, the paper money had a real value which was much higher than the value of the material (paper) with which it was produced. The money supply, the total value of notes and coins could be controlled by the central banks. Controlling the monetary supply is still an effective means to control economic growth and inflation of a nation.
Until the First World War, most central banks supported their currencies with gold: The value of issued notes and coins was covered with gold. Although paper money could be exchanged for gold in theory, this possibility was not used in practice. But the theoretical possibility of doing so supported the value of the currency.
Stock Exchange Market and Forex
The origins of stock exchanges date back to the Middle Ages. People had to go to specific marketplaces to exchange their stocks – somtethin that can be done today from within the own living room. And besides trading the classical asset classes bonds, equities and real estate, a new asset class has been introduced to online trading by private persons in the beginning of the 21st century: foreign currencies, which are traded in foreign exchange markets or short: Forex. Thanks to Forex brokers, private investors can directly trade foreign currencies online.
The Forex market has significant differences to the stock market:
- Forex Trading is open around the clock, 24 hours a day
- The Forex trading market worldwide has an estimated daily trading volume of more than 4 trillion U.S. dollars. This makes Forex the largest market in the world. It is also the most liquid market. Buyers and sellers can be found within a split second
- Unlike stocks, there is no bull or bear market in Forex. As a buyer of a currency pair, you can earn money in any market situation by betting on a currency pair. You can earn money if you think that the Euro decreases in relation to the US-Dollar by selling Euros and buying Dollars at the same time. If you think the Euro will increase in relation to the USD, you buy EUR and sell USD. However, earning money with Forex is not that easy, because Forex is a zero sum game: what one wins, another person loses
- When trading currencies with a Forex broker, you can use a high leverage. By trading with a leverage, you can earn money already from the smallest changes in exchange rates. With a leverage of 200:1 for example, you can trade currencies with a value of 100,000 USD by just risking 500 USD. If the USD is rising by 1% then you’ve earned 1,000$ and tripled your initial 500 USD to 1,500 USD. However, if your position decreases by 0.5%, then the entire invested capital of 500$ is lost
Forex Trading for Private Traders
Forex trading has become a thrilling hobby for many persons – maybe also you will soon enjoy trading Forex online. Just choose a FX broker from our Forex broker reviews, and move into the fascinating and fast world of Forex trading. We advise you to trade only with a demo account in the beginning in order not to risk real money before you fully understand the risks and the potential returns from Forex trading.