Trading FX in 2012: a constantly evolving market place
The open financial markets are so much more than a platform for international trading, and in fact offer a reflection of technological, social and economic developments as they evolve throughout the world. This is the primary reason why the foreign exchange has changed so significantly since the 1980′s, and why the methods used to trade have grown increasingly efficient and variable. Trading FX in 2012 is now a viable and potentially lucrative activity for individual traders as well as the representatives of established financial institutions, in an open market that continues to evolve with each passing day.
Assessing the Changing Economic and Social Climate: 30 Years of Evolution
Currency trading was an entirely different concept in the 1980′s, most notably because of the different methods of executing orders and transactions. The advent of the computer age in the late 1960′s ultimately played a significant role in changing this, as it initiated the development of digital data lines and advanced communication systems which today allow transactions to take place instantly and in real time. By the start of the eighties such technology was still its infancy, and the need for human brokers, middlemen and telephone communication was still extremely pressing.
Aside from technological advancements, social and economic developments in the wider world have also had an impact on the foreign exchange and trading currency. Geographical evolution is a prominent example, as since 1980 the all powerful Soviet Union has dissolved while new economies have subsequently evolved in the Middle East. Similarly, a series of currency crises and the continuing decline of the once dominant U.S. dollar throughout the 1990′s and beyond have also impacted upon currency traders, as a number of currencies have either weakened or collapsed entirely during this time.
Trading FX in Today’s Market
One of the most significant economic changes to effect the foreign exchange is also one that has increased relevance today, and it concerns the incorporation and subsequent collapse of the Euro currency. Introduced in 1999 among European Union member states, it was implemented to create a more unified trade market and enhance the liquidity of the open financial markets, but its main benefit was the addition of a new dimension in forex trading that opened up more opportunities for investors to trade currency for a profit.
The Euro zone crisis has therefore had a sizeable impact on the foreign exchange, and the decreasing value of the Euro currency is of huge concern to traders. Its struggles are even more pronounced when you consider the increasingly poor performance of the dollar, which as a single currency played a role in an estimated 70% of all foreign exchange transactions as recently in 2008. The decline of these currencies and the emergence of the Chinese and Japanese economies as market leaders are determining factors in the modern foreign exchange, and set to usher in the dawn of direct exchange trading.
The Bottom Line
Currency trading and the open financial markets have already changed significantly over the course of the last 30 years, with innovation, political unrest and economic upheaval all having a huge impact on traders activities. With Japan and China set to commence direct currency trading this week, and the continued advancement of Direct Access Trading systems empowering a growing number of individual traders, it is clear that the foreign exchange is set for further evolution in the immediate future and beyond.