Will Forex Trading End?
Updated: Apr 18, 2019
This is a bit of a scary question for us Forex Traders!
To answer this, we first need to understand why it is that we can Trade Forex in the first place.
When the Bretton Woods system was in use it would have been extremely difficult as a retail trader to make a profit from Fx Trading. This system was agreed by 44 nations in July 1944, and was the establishment of a new international monetary system, following the end of the second world war.
the delegates from these 44 countries agreed to their currencies being pegged to the US dollar, which, in turn, was pegged to the price of gold.
However, this agreement ended in the 1970's when President Nixon announced that the U.S.A would no longer exchange gold for U.S currency.
So, since then we have operated on a floating exchange rate, whereby a currency's value is purely based on market sentiment. This, in turn, is based mainly on the economic prosperity of the country but also on a multitude of other factors - such as the Yen being seen as a "safe haven currency". This means when traders are avoiding risk in the markets, the Yen will likely rise. This has allowed a lot more freedom for the currencies to rise and fall against each other, in other words volatility, which is where Fx Traders can make their profits.
Will we return to a time where the majority of currencies are pegged to the dollar and/or gold?
Well, needless to say, anything is possible, however, entire library's have been written on this subject alone and still, no-one really knows.
To be honest though, it doesn't really matter, and here is why...
The skills you learn as an Fx Trader are applicable to any liquid market - stocks, futures, options, commodities, just to name a few. Therefore, even if the Fx Market were completely shut down tomorrow - Fx Traders would be able to quickly apply their skills to lots of other markets!
So, don't focus on the specifics of the Fx Market and whether it is here to stay or not. Focus on gaining trading skills which can be applied in many many different circumstances - lots that you may not expect (I've heard Fx Traders make great poker players! Disclaimer: that's not a recommendation to give up Fx Trading and go and be a professional poker player!)
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