The term forex, or forex market in French, comes from the contraction of the English foreign exchange market terms. Forex refers to the exchange of currencies whose exchange rates are constantly fluctuating. This floating exchange rate system has been in effect since March 1973 following President Nixon’s unilateral decision to end the convertibility of the dollar into gold in August 1971. This decision led to the abandonment of the fixity of the exchange rates of the various currencies in relation to the dollar standard, a system set up at Bretton Woods in 1944.
The foreign exchange market is open 24/7. In other words, it means that it is possible to trade at any time of the day and night. It is considered the second largest international financial market in terms of overall volume, just behind the interest rate market. It is the most liquid market in the world, with a volume of trade in constant increase for several years. Thus, in 2007, the daily volume traded on average on the forex reached 3,210 billion US dollars. Since then, this figure has increased considerably. The economic and financial crisis of 2008 has in particular allowed a new burst of the foreign exchange market, many being the investors who turned away from the shares for the currencies because it does not exist on the forex of concealed risks. With the economic recovery, these investors have often made the decision to continue to operate on the currencies.
For a long time, the foreign exchange market was exclusively reserved for professionals, that is to say institutional investors, banks, companies and fund managers. However, with the advent of the internet in the early 1990s and trading platforms for individuals, the foreign exchange market opened up to a new type of investor. These are usually individuals who go through online brokers to invest on currency pairs. Generally, they can not place sums as important as institutional investors, which is why online brokers, also known as brokers, make trading accounts available to individuals from only 50 or 100 euros.
As a trader, it is possible to invest on any currency pair as long as your broker offers it on its trading platform. In general, the most traded pairs are the EUR / USD, USD / JPY or USD / GBP pairs, knowing that the US dollar is the dominant currency in nearly 90% of trades. In order to place an order on the forex market, it only takes a few quick clicks. Once you decide to close your position, you are automatically credited by your broker for any gain or debited any losses on your trading account. All this is done in a matter of seconds and safely.