Forex might be extremely popular right now, but it’s not a new thing. Foreign exchange market has been around ever since the first time one currency was traded for another. It’s the oldest and the biggest financial market in the world in terms of number of transactions and their value. Trades between central banks, multinational speculators, banks, corporations, financial institutions and even governments is an essential part of Forex market – but there’s plenty of action for smaller, independent traders as well.
Some of the things that makes Forex trading market so unique, apart from the massive number of trades taking place every second are the geographical dispersion, the fluidity of the market, the twenty-four hour trading day and the number and variety of both traders and the factors that have an effect on the exchange rates.
One of the main factors that has a massive effect on the exchange rates are the news. Yes, the news – not some inside info that only the privileged few have access to. That’s another great thing about Forex market – there’s no inside traders. All Forex traders have the same chances, and in order to get all the relevant info, you just need to keep your ear to the ground and stay on top of the daily news. Some of the biggest, most profitable trades in the history of Forex trading (or any other type of financial trading to be honest) came from traders who were able to predict a market shift based on nothing more than the publicly available information extracted from news broadcasts.
One of the best examples of using current developments in the world to decide on Forex trades took place in 1992. That summer, there was a lot of speculation surrounding England’s monetary and political position. Many experts believed that the European Monetary Union (EMU) was going to reject England, and that would severely affect the exchange rates and the value of the British national currency, the Pound. The founder and CEO of one of the biggest hedge funds in existence, the Quantum Fund decided to take advantage of this situation, and took action by placing a short position worth ten billion pounds. If England didn’t respond adequately, this was enough to further destabilize the Pound, and lower it’s value. Managers of the Bank of England tried to salvage the situation by selling off most of their Forex reserves, but the market was stronger. In September 1992, on a day that became legendary as the Black Wednesday, the Bank of England was out of currency to sell, and the Pound devaluated dramatically in a very short amount of time. England was forced to leave the EMU, and George Soros, the founder of Quantum Fund earned himself more than one billion dollars – becoming both famous and infamous in the process.
Using Forex market, one man was able to change world history, force an entire country to it’s knees and make a billion dollars – all in the same day. With Forex, the possibilities are truly endless.