Trading currency pairs on the foreign exchange market is growing in popularity. It involves speculating on whether the value of one currency will rise or fall against another. Before the 1970s, it was mainly used as a business tool for big companies working across different countries. That changed following President Nixon’s decision to allow the US dollar to float in 1971. The then president ensured that the dollar was no longer convertible to gold. A system of floating rather than fixed exchange rates between currencies was born. Both speculation and investments were now possible on this newly available currency market.
Over the last few decades, the internet has made the forex market even more accessible. It has expanded to become the largest financial market in the world. So, how did the internet open up forex trading to the masses?
Online trading
For starters, with the internet came the rise of online trading platforms. A number of companies saw the convenience that trading on a desktop or laptop could bring to traders. They enabled people to set up accounts online, deposit funds, and open and close positions. Anyone could speculate on the price movements of different currency pairs from their home or office. They no longer had to go to a physical location to trade.
Recently, many brokers have also branched out into sophisticated apps. These allow for greater flexibility, since the apps can be downloaded onto a smartphone or tablet. Trades can now literally take place on the go at any time. Markets can be tracked more closely on apps too, which is useful due to their fluctuating nature.
Derivatives trading
Most online brokers offer various types of derivatives trading options to trade forex. Spread betting (UK only) and contracts for difference (CFDs) are two examples. Derivatives make it possible for traders to speculate on the price changes of financial instruments, like currency pairs, without actually owning them. Buying and selling occurs on units, which represent the value of the underlying forex pair. The rise of the internet has given traders easy access to spread betting and CFDs on the forex market.
Spread betting is only available in the UK and it’s exempt from both capital gains tax and stamp duty. CFDs can be traded around the world. They are also currently exempt from stamp duty in the UK.
Connecting the world
Since the dawn of the internet, it has advanced rapidly. We can now get online almost anywhere we go. Coffee shops, stores, airports, hotels etc. all provide free wifi. Speed and reliability have improved greatly over the years. Dial-up is pretty much dead and in its place we have broadband. Faster connections that can handle more data have made forex trades increasingly viable. Traders don’t have to worry about their dial-up dropping out in the middle of opening or closing a position, for example. Conveniently, they can also monitor their open positions from many locations. All you need is a secure and stable net connection to get started.
Training in forex
Finally, the internet has made training in FX trading much more accessible as well. Those who want to learn about forex can go online to find multiple guides, video tutorials and webinars. They can also practice forex trading with virtual money using a demo account. Getting started and grasping the basics has never been more straightforward.