Evolution of forex trading


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The Evolution of International Trade and Modern Day Trade Routes.
Over the past decade, international trade has become more tightly linked than at any point in human history. Global flows of goods, services and capital have reached unprecedented levels worth trillions of dollars every year and they continue to rise in accordance with the increasingly interconnected nature of modern trade.
While governments and large international businesses have been able to conduct vast quantities of trading with one another for centuries, it would have been unthinkable even thirty years ago for individuals and even the smallest of business enterprises to easily trade with each other regardless of their geographical location. However, with the technological improvements made in international shipping, logistics and – of course – the revolutionary impact of the internet, such trades are now a commonplace part of the modern economic reality that we currently enjoy.
Still, it has taken a great deal of time, ambition and ingenuity to forge this dynamic and free-flowing trading environment. To demonstrate this, we take a brief look at some of the key trading routes established throughout history.
The Silk Road.
The Silk Road is a term used to describe an amalgamation of a network of trading routes that served to link the eastern and western worlds through commerce and cultural exchange as they extended over 4,000 miles across Europe, Arabia, Persia, India and China. Its name derives from the incredibly lucrative trade in silk which originated from China around 200 BC and flourished over the course of the following six centuries.
Despite the value and importance of its namesake, the Silk Road served to convey much more than bolts of silk. From its gradual establishment in the early centuries BC, right up until its disintegration along with the decay of the Mongol Empire in the 15th century AD cultural exchanges flowed as readily as tangible goods. Religious tenants, philosophies, technological advancements and ideas were transported and spread wide as the traders who navigated the Silk Road were joined by priests, free-thinkers, soldiers of fortune and all manner of adventurous individuals.
British – Indian Spice Trade.
In 1640 the English East India Company – a joint stock company that grew to such vastly powerful proportions that it encompassed half of the world’s trade – leased Bombay Island which marked the start of the Company’s eventual domination of India. From humble beginnings the Company grew to monopolise lucrative trade resources and made vast fortunes from exporting silks, cottons and dyes to Europe. Critically, the EIC controlled the global distribution of India’s spices; trade goods that rose spectacularly in popularity and price.
By the beginning of the 19th century, Britain’s hold over India was complete and the EIC had such vast resources gained from their trade monopolies that they wielded more power and influence than most countries.
Sea Lanes, Airplanes and the Information Superhighway: The Trade Routes of Today.
Returning to present day, our key trade routes are no longer contiguous and they extend right across the globe. Air freight allows for goods to be transported as directly as possible between countries and shipping sea lanes allow for larger cargoes to be moved, albeit more slowly. Highly developed railway systems are a vital part of the multi-modal transportation network that links business and manufacturers with their end consumers.
This new network – coupled with the digital trading empire of the internet – has grown and woven interconnected bonds to become a trade route on a scale never experienced before in human history. To put it into context, it has grown to the point where US maritime trade alone accounts for the annual transportation of goods totalling over US$6 trillion. When viewed as a whole, the global trade network – where every item imaginable is moved by plane, train, ship and truck – is responsible for the transportation of unimaginable wealth every single day.
The internet’s rapid expansion and refinement throughout its brief lifespan has led it to a point where goods, services and capital can be traded within the blink of an eye, something our ancestral traders would be understandably astonished to see! Admittedly, physical goods traded online still require transportation via air, sea or overland but the fact that they can still be moved from one side of the globe to the other within hours or days rather than weeks or months is testament to how far international trade has come. In addition, the development of secure, reliable and cost-effective platforms for international online payments has encouraged billions of traders – from major company CEOs to individuals buying and selling on eBay – to trust in online trade despite the vast geographical distances involved.
The internet has also allowed for the greatest cultural exchange that humanity has ever witnessed. Like trade routes of old, it allows ideas and information, theories and philosophies on every subject to flow like never before. However, the internet’s reach already extends far beyond that of its historical counterparts and if it enjoys a similar longevity then it will no doubt continue to shape truly extraordinary changes on the way we live, think and make exchanges.
The Biggest Traders along the Modern Trade Routes.
So who are the biggest traders of the key arterial routes of modern trade? Who are the biggest importers and exporters? Who are the spiritual successors to the lynchpins of the Silk Road and the Indian spice routes?
In terms of importing, China has managed to maintain its position as a world-shaping trader, a tradition thousands of years in the making. It is currently the world’s third biggest importer with estimated annual imports totalling USD$1.59 trillion. It is narrowly outpaced by the US at $2.273 trillion annual imports and the EU at $2.312 trillion.
However, when it comes to exports, China manages to turn the tables and assumes the number 1 spot with $2.21 trillion annual exports, with the EU and US trailing with $2.173 trillion and $1.575 trillion respectively.*
Thanks to increasingly interconnected trade routes, both physical and digital, the spirit of the historical trade routes still lives on. In today’s interdependent trading atmosphere, it isn’t just the likes of huge commodity conglomerates like Vitol and Glencore International that stand to gain from quicker and easier trading connections. Indeed, wholly new companies are being created in order to support the growth of international trade through providing services in areas such as logistics, processing, international payments and insurance.
If that spirit of collaboration and cultural exchange continues to exist then it seems certain that global flows of goods, services, capital, concepts and technologies, indeed, trades of every size and calibre, will continue to flourish.
*All figures are taken from the World Trade Organisation (WTO) and are based on findings from 2013 surveys and statistical reports.

Evolution of forex trading


Forex trading is conducted in the foreign exchange market, otherwise referred to as the forex or FX market. This is the largest financial market in the world, with an estimated daily average turnover well in excess of US$1 trillion. A foreign exchange rate is the relationship between two currencies, which means the amount of one currency that would be required to buy (or sell) one unit of another currency. Currencies are quoted in pairs, e. g. Euro/US$ = EUR/USD, US$/Japanese Yen = USD/JPY, etc. Forex trading involves a foreign exchange transaction, defined as the simultaneous buying of one currency andselling of another currency.
The foreign exchange market entered a new phase in 1971 when the Bretton Woods accord, which was characterized by fixed forex trading rates, was abandoned. This led to a new forex trading system of floating rates and opened a new world in foreign exchange.
Forex trading is said to be a 24-hour, 5 day a week market, starting each day in Wellington, NZ and then moving around the globe as thebusiness day commences in the next financial center. This rotation includes Tokyo , London, and New York. This allows foreign exchange market participants to react to news, whether it be economic political or social, 24 hours per day. Unlike other markets, such as stocks or futures, forex trading does not involve a central exchange and is considered to be an over the counter market known as the interbank market. Most forex transactions are conducted between two counterparties via the telephone or over an electronic network, such as the internet.
Forex trading, once the province of commercial, investment and central banks has evolved over the years as other players took on a greater role in foreign exchange. This has seen forex trading evolve as multi-national companies, hedge funds, fund managers, individual speculators and private investors took on a greater influence. The evolution of the internet has further opened forex trading to the independent currency trader who can follow the market on a 24-hour basis and trade foreign exchange online.
Factors that have attracted the retail currency traders to forex trading include the ability to trade 24 hours, 5 days per week, a high level of foreign exchange market liquidity, the ability to benefit in both bull and bear markets, narrow bid-offered spreads by historical standards, low margin requirements and general market volatility.
On the other hand, anyone considering forex trading should first carefully evaluate the risks beforehand . Jay Meisler, a partner of Global-View, says one problem of trading with too-high leverage is that one piece of surprise news can wipe out one's capital. "Those who treat forex trading as if they were in a casino will see the same long-term results as when they go to Las Vegas ," he says, adding: "If you treat forex trading like a business, including proper money management, you have a better chance of success." - Newsweek International, March 15, 2004.
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Evolution of Currency.
We’ve come a long way from bartering with shells to using nifty rectangular papers to pay for the things we want.
But how exactly did we get the opportunity to stuff our wallets with green bills instead of worrying about having enough fish to trade for bread? Money has experienced an incredible evolution over the centuries, and this is how its development breaks down.
Guest post by UFXMarkets.
Way back in the day — yes, even before your grandparents’ back-in-the-day stories — money as we know it didn’t exist. If someone wanted a good of some sort that another person owned, bartering would be the way to get it. According to PBS, bartering is the exchange of resources or services for mutual advantage and has likely been going on since humans first walked the Earth.
When trading was common, certain bartered goods started developing monetary properties. These goods can be more frequently used to acquire other goods. For example, in an early British colony in Australia, rum started taking on value and was commonly traded. Bartering still couldn’t work, though, because those who “sold” goods might not have wanted what others had to offer.
Some goods developed more worth because they intrinsically had more use to people. These items took on the role of currency because they were more widely accepted. Some examples throughout history include cattle — one of the most used types of commodity money — and shells. Cowrie shells started being used as early as 1200 B. C. in China and were the most widely and longest used currency in history.
To further illustrate commodity money, bread (which I think everyone can agree is very useful and very tasty) took on the form of currency in medieval Iraq. But using commodity money couldn’t work forever; its lack of absolute value (as it was still generally socially determined) made it difficult to trade commercially. Today, many of us don’t own cows, but we can still leverage the market by trading commodities online.
That’s right: some of the earliest currencies centered around coins, which are now just noise-makers in your pocket or purse. Some of the earliest forms of coins could be the bronze and copper cowrie imitations the Chinese made back in 1000 B. C. By 700 B. C., the Lydians started making rounded coins. Monetary gold gained a lot of popularity because it wasn’t easy to find, easily storable, and alloys could be measured to see how much gold they contained.
Standard coinage began when coins were pre-weighed and pre-alloyed so the value was determined in advance. However, making coins out of gold, silver, and copper didn’t last forever. Coins started taking on a representative value once other metallic alloys were used instead of the valuable ones. When paper money came along, coins’ significance and worth started to decrease. (Sound familiar?)
Continuing their trend of being first to do tons of things, China started using paper money during the T’ang Dynasty, which ran from 618 A. D. to 907 A. D. As centuries passed, paper money started taking on different value. Like coins, paper money began to have representative value, which means that silver or gold was still backing the amount on the paper and could be exchanged.
A step further than representative money is fiat money, which doesn’t have the support of any other commodity but has a forced value. An early American example is the production of Continentals created to finance the American Revolutionary War, though they quickly lost value because they had no backing. However, the U. S. eventually returned to fiat money indefinitely in 1971, and that’s the type of currency in use today.
While early forms of currency used to have intrinsic value that made people confident in using it to trade or purchase items, our current form of money is used with the understanding that the bills and coins will be honored. We owe our thanks to the Federal Reserve for maintaining this system, as confidence in the dollar is crucial for the stability of our currency.
About Author.
Yohay Elam – Founder, Writer and Editor.
I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me.
Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.
China was first; China will be first. What great people live there.
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