The importance of having a forex

[tommyfx]

Hi traders

This is going to sound a very basic question however i am guilty of learning all about trading styles psychology am even at the stage where i don't loose money (!!!) but i dont have a very good understing of why we actually have a foreign exchange. I have asked several people this question none of them have given a confident economically sound answer. I was hoping one of you would be kind enough to give me a quick introduction into the macro econmomic viewpoint of why we have one. What would happen if the world didnt have an exchange? Who are the main users of it (i.e banks speculating big businesses hedging on import/export orders for their products). also if more european countries enter the euro we lose heavily traded ps such as cable are we headed for a future where forex is less important especially as it is likely we may only have 3 main currencies Euro Yen dollar. I know this is a basic question that doesnt really have a basic answer but i ( i'm sure other newbies) would find having a better understing of how/why forex is there would be incredibly useful.

Many thanks in advance

tom

[Fatman in the H]

Originally Posted by tommyfx

Hi traders

This is going to sound a very basic question however i am guilty of learning all about trading styles psychology am even at the stage where i don't loose money (!!!) but i dont have a very good understing of why we actually have a foreign exchange. I have asked several people this question none of them have given a confident economically sound answer. I was hoping one of you would be kind enough to give me a quick introduction into the macro econmomic viewpoint of why we have one. What would happen if the world didnt have an exchange? Who are the main users of it (i.e banks speculating big businesses hedging on import/export orders for their products). also if more european countries enter the euro we lose heavily traded ps such as cable are we headed for a future where forex is less important especially as it is likely we may only have 3 main currencies Euro Yen dollar. I know this is a basic question that doesnt really have a basic answer but i ( i'm sure other newbies) would find having a better understing of how/why forex is there would be incredibly useful.

Many thanks in advance

tom

I will have a go however bad the end result is please correct all myt mistaken understings.

Foreign Exchange is used to basically value one countries economy or financial position against anothers.

GBP/ USD is measuring the GBP in comparison the the USD a measure of the perceived strength of the UK economy against the US economy the value out of investing money in one country as compatred to the other. At the moment it is perceived that the UK is stronger than the US hence the 1.9000 value of the GBP V USD.

This is the way that I underst it anyway I know that a bit back when the Aussie economy was going gangbusters the AUD was valued at over 1.0000 V the USD this was saying that people saw the Aussie economy to be in a healthier position as compared to the US economy that people would get better value out of investing their money in Australia as against the US.

This is the way that I underst it anyway would be great if somebody would correct me or agree so that I am fully understing.

[mishak]

What would happen if the world didnt have an [forex] exchange?

Well this is a good question. Most likely our grchildren will see this. After Aerobus will buy Boeing... Google merge with Linux to bankrupt Microsoft ... China buy Canada ... such kind of staff

When we all become global unified people of the Earth paying fees to the global government. Remember "the fifth element" ?
The global currency will be "the Credit"

Probably we'll start then to trade with Venus or smth

[ForexSeraph]

Hello everyone.

I have been trading the Forex for 4 years trading successfully for about 2 1/2. The Foreign Exchange Market as all of us may know is one of the most exciting profitable businesses on the planet. Some people lose some people win.

But what exactly is it? how do we make money off of it?

In your favorite Forex platform you buy lots that consist of $1000 USD pit it against another country. You decide whether your favorite p will rise or fall. if you decide correctly you make money.

What's happening here? It's fly simple.

Let's pretend we're back in 1940's when PC's were a luxury The Internet was probably a coffee shop or something. This would coincide with The Great Depression but let's assume for our sake it didn't. (We want to make money don't we?)

Alright so here I am I have $1000 to my name. This is all I have left I really want to make more money off of this. We're already assuming a lot but we'll have to assume that in Europe I have an Aunt Ruth who would be more than happy to let me live there with my $1000...otherwise I'll have to pay rent!

Well I get off my plane I'm in Europe now. Well I'm gonna need some Euros (they didn't exist at the time go with me here) so I go to the local Foreign Exchange. The people behind the counter tell me:

We can exchange your $1000 to 850 Euros since right now Euro's are worth more.

Well I don't want to do that because I'll have less value then what I came with. I decide that I'll hang on to my $1000 for a couple of months. Four months pass by in the blink of an eye now I go to the exchange spot:

We can now exchange your $1000 to 1250 Euros because the U.S. economy rose over the last few months.

Wow! Just for hanging on to the same amount of money for a few (days? weeks? months?) I have made a return on my investment. Of course those 1250 will revert back to $1000 TODAY but let's say I hang on to this money AGAIN. the U.S. economy falls AGAIN:

We can now exchange your 1250 Euros to $1500 because Euro's are worth more again.

This is basically what you are doing over the computer many many many times. You just don't have to pay for so many plane tickets.

I hope my colourful illustration helped anyone underst what's really going on behind your computer HAPPY TRADING!

[happy99]

"GBP/ USD is measuring the GBP in comparison the the USD a measure of the perceived strength of the UK economy against the US economy the value out of investing money in one country as compatred to the other. At the moment it is perceived that the UK is stronger than the US hence the 1.9000 value of the GBP V USD"

USD/Jpy traded at 100+ doesn't mean usd stronger than jpy by 100 times

[yasirdxb]

Originally Posted by tommyfx

Hi traders

This is going to sound a very basic question however i am guilty of learning all about trading styles psychology am even at the stage where i don't loose money (!!!) but i dont have a very good understing of why we actually have a foreign exchange. I have asked several people this question none of them have given a confident economically sound answer. I was hoping one of you would be kind enough to give me a quick introduction into the macro econmomic viewpoint of why we have one. What would happen if the world didnt have an exchange? Who are the main users of it (i.e banks speculating big businesses hedging on import/export orders for their products). also if more european countries enter the euro we lose heavily traded ps such as cable are we headed for a future where forex is less important especially as it is likely we may only have 3 main currencies Euro Yen dollar. I know this is a basic question that doesnt really have a basic answer but i ( i'm sure other newbies) would find having a better understing of how/why forex is there would be incredibly useful.

Many thanks in advance

tom

Why we have a foreign exchange?

simply becoz the world does not have a common currency. so when

companies governments sell/buy products/services in a foreign country

they must convert their profits made in a foreign currency to their domestic

currency.thats why we have a foreign exchange. to convert one currency to

another.

What would happen if the world didnt have an exchange?

The Americans would be exchanging computers for sugar with brazilians .

Who are the main users of it?

We the speculators who trades (exchanges) only for profit are the main

users of forex.

Correct me if I'm wrong!

Yasir.

[novice]

Pre 1970 there was not really a forex market. There was a gold market.

Each national currency was really just gold by different names (e.g. dollar pound franc etc).

Each national currency was theoretically exchangeable for a certain weight of gold (by governments if not individuals).

Then post 1970 no national currency was exchangeable for gold by anyone anywhere.

Thus with no stard to measure a currency against (i.e. gold) they floated in value against each other based on the opinions of traders (i.e. forex).

But all fell in value against goods services.

Maybe a better question would be what is the importance of having an irredeemable Fiat currency? Because the development of the forex market Fiat currency have gone h in h.

[novice]

Originally Posted by mishak

paying fees to the global government (who I assume will issue thus be funded by the global Fiat currency)

The global currency will be "the Credit"

What a horrific idea

A global government with unlimited ability to fund itself via issuing currency would mean a global government with unlimited ability to impose its tyranny.