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Ask Price The price at which traders can buy the base currency
Hedging The practice of opening several positions at once where one position minimizes the risk of another position
Lot The standard unit of trading. One standard lot equals 100,000 units of the base currency, a mini lot equals 10,000 units, and a micro lot equals 1,000 units
The historical ways of evaluating the currency value of a country by worth of Gold, came to an end after the Second World War. Even during the first World War, the value of Gold was used to determine the value of foreign currency of a country. The US dominated financial world introduced the Bretton Woods Agreement in 1944, where the Forex trading considered the dollar value of the currency of the concerned country as the key parameter.
The objective was to fix the dollar value based on the rate of gold of the concerned country. The aim was to establishing a stable market to get rid of any global financial crisis by prohibiting countries to devaluate their currencies, had been hindered by the phenomenal growth of Forex trading, which demands freedom from such control to take the ultimate advantage of the continuous influx from the foreign market. In fact the reign of gold could not face the challenges of modern economic boom all over the world. However the story of Frankenstein came into being, the US dollar itself got devaluated and that hit the final nail in the coffin to end the Bretton Woods Agreement era in 1971, allowing the birth of free floating real Foreign Exchange Market of today’s world.
US dollars have always played a major role in Forex and the reserves of US dollar serve as the prime factor in determining the country’s wealth even today. The concept of globalization and the open market of outsourcing have made the core concept of Foreign Exchange much more pertinent. Foreign trade is hardly limited to big merchants only, it has now entered into the desktops of home computers where the concept of working from home has overwhelming popularity as a mode of extra income.
Outsourcing jobs from US and UK to the third world countries like India, China, Malayasia have ultimately helped to increase the Foreign Exchange worth of the country. Besides the core market of Forex trading, a huge amount of exchanges in currency go on every day. Currencies now move freely across geographical boundaries and in spite of such free floating, none of the major industrialized countries has faced any blows during the last thirty years.
The Internet has provided the unique opportunity of Online Foreign Currency Trading, which uses mainly Forex exchange software. As the very preliminary rule of foreign exchange never generates any scope for a physical bank or exchange, various companies have emerged in the recent past to build up a virtual trading platform, where a lot of people can participate even without much knowledge of the subject. If a beginner becomes the prime reason of worry, then anybody can take help from the various forex news services, which are available all over the Internet. The pictorial representation of hike and downfall of foreign currencies will always provide comfort and smoothen the decision making process.