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Fun forex facts, secrets, tips and 10 things you didn't know about trading in foreign currency, all wrapped up in one nice package. Ready? Let’s go!
Did you know that currency exchange has been around for centuries? Or that the worst inflation in human history happened in 2009 in Zimbabwe when it went up to 6.56 sextillion percent? Who knew that was even a number! With over 7.5 trillion US dollars being traded, it’s no wonder they say ‘money makes the world go round’.
Why is it important to know these fun forex facts? Well, if we are not educated in the history of something, we are doomed to repeat it, right? The more you know, the better prepared you are. And hey, it makes for interesting conversation, if nothing else.
Read on to see what nuggets of information and wisdom you may gain, to help you along your forex journey.
So what are we going to cover in this article?
10 Fun Forex Facts
Here is a curated list of 10 things you didn't know about trading in foreign currency.
- Currency trading has been around for centuries.
- There has never been a financial collapse that has affected forex.
- Forex is the most liquid market in the world.
- London is the center of the forex market, not the US.
- A giant steel cable used to synchronize the GBP/USD currency pair.
- The worst inflation ever in history happened in Zimbabwe in 2009.
- Before 1908 any bank could print their own money.
- Before retail traders, forex required millions to enter.
- Crypto could challenge forex in the future.
- Forex will always be around.
But wait, there’s more!
We are also sharing a few secrets that can help you optimize your trading.
Forex Trading Secrets You Need to Know:
- Declutter your chart.
- Don’t underestimate technical and fundamental analysis.
- Be aware that small changes have a big impact.
- Avoid triggered trading.
So, let’s dig in.
#1 Forex Fact: Currency trading has been around for millennia
It is recorded that even in biblical times, and back in ancient Egypt, currencies were being exchanged. ‘Moneychangers’ would set up stalls in markets and charge a commission to change one currency for another. Evidence of this is shown in Talmudic writings and ancient Egyptian papyri.
#2 Forex Fact: There has never been a financial collapse that has affected forex
The second item on the list of the 10 things you didn't know about trading in foreign currency is that there has never been an actual collapse of the forex market. There have been crises and crashes in various stock markets around the world where investors have lost millions. During those times, the forex industry was resilient enough to survive collapse. Why is this the case?
Unlike other types of investments, forex trades are not tied to any particular country or region, so it is less susceptible to economic events within one country or region. Another reason is that the forex industry is influenced by traders’ decisions, not companies or shareholders. In addition, most currency pairs are traded around-the-clock by market makers who offer bid/ask prices for each pair of currencies being traded at any given time (e.g., USD/EUR). This ensures that there are always buyers and sellers in any given currency pair at all times, regardless of whether there's an economic crisis going on elsewhere in the world.
#3 Forex Fact: Forex is the most liquid market in the world
Every single day, there are approximately $7.5 trillion being traded around the world. This is an enormous amount of money being traded, making forex a bigger player than the stock market or any other investment instrument.
#4 Forex Fact: London is the center of the forex market, not the US
It’s a common misconception that the center of the forex industry is in the USA. This misconception may be due to the fact that the most common currency traded is the US dollar as it shows up in 80% of forex trades. However, the truth is that an estimated 19% of trades take place on that side of the pond, and 43% of forex trades are made in the UK. This makes London the center of the trading world.
#5 Forex Fact: A giant steel cable used to synchronize the GBP/USD currency pair
Before satellites and fibre optics, the London and New York Stock Exchanges were linked by a massive steel cable that crossed the Atlantic and was used to sync the rate between the GBP and USD currencies. Hence, the currency pair GBP/USD is to this day still called “the cable”.
#6 Forex Fact: The worst inflation ever in history happened in Zimbabwe in 2009
In most parts of the world currency movements are subtle regarding inflation rates. But not in Zimbabwe, where the worst inflation in recorded history happened in 2009 at 6.56 sextillion percent. Can you say ouch! Due to this event, Zimbabwe used as its main currency other foreign currencies up until 2014.
#7 Forex Fact: Before 1908 American banks could print their own money
Did you know that prior to the US Federal Reserve’s founding in 1908, virtually every American bank could print its own money? Yes, that’s right! This made it highly probable that if a bank decided to start printing money, it may lead to widespread inflation of the US dollar. Hence, the Federal Reserve stopped banks from being able to print money on their own.
#8 Forex Fact: Before retail traders, forex required millions to enter
Several decades ago ‒ before the emergence of retail trading brokers and online trading ‒ trading currencies was not as widely and easily accessible as it is now. In order to trade forex you needed to be a financial institution or investment company with at least $40 million to start trading. This was not feasible for the majority of people. Nowadays you can open an account with an online forex broker for as little as $50 and start trading from anywhere in the world.
#9 Forex Fact: Crypto could challenge forex in the future
Although cryptocurrencies are a long way away from reaching the same level and volume of trading as forex, if forex were ever to be challenged by another industry, that would be crypto. The current trading volume of crypto is in the tens of billions. That’s still quite a way away from forex’s boasting numbers of $7.5 trillion. It might take many years, but with the growth we’re seeing in cryptocurrency trading, the forex industry could definitely face a worthy adversary.
This is one of the reasons why diversifying your portfolio by investing in different instruments and markets is beneficial. If you lose in one, you stand to gain in the other.
#10 Forex Fact: Forex will always be around
The forex industry will always be around and there will always be some form of exchanging currencies, even if traditional currencies change or are gone forever. Due to the various countries and their diverse nature, economies, and financial structures, there will never be just one currency worldwide. There will always be a variety of currencies even if they are not the ones we know today. Therefore there will always be opportunities to exchange and trade those currencies.
Seeing as forex has been around since almost the beginning of time and we see almost no current challenges, chances of collapsing, and it will continue to be around even if traditional currencies change, it is safe to say that learning to trade forex is a good investment of your time. With proper risk management, strategy, and the right tools, you could be well on your way to seeing some potential profits. On the other hand without the proper knowledge and tools, or an overzealous approach, you could experience some major disappointments.
To help equip you even further, we’ve put together some ‘forex secrets’ and tips to optimize your trading strategy. Read on…
Forex Trading Secrets You Need to Know
We've gone over the forex facts and 10 things you didn't know about trading in foreign currency, but did you know there are also a few secret tips that are useful to implement?
Avoid triggered trading
Sometimes, as traders analyze charts and market opportunities, they may get impatient when there isn’t enough movement happening. This can trigger traders to act hastily and make trading decisions that are not based on research and analysis, but rather on a ‘hunch’.
Don’t get me wrong, hunches can be good in the sense that they can motivate a trader to do research and then make a trade. But trading just on a hunch, or because you’re bored or triggered will most likely lead to disappointment.
When you let it sink in that your main job as a trader is to build and stick to a strategy based on market analysis, and then make trades, that’s when you’ll start making better decisions.
Don’t underestimate technical and fundamental analysis
Forex is a leveraged product, meaning that small changes in price can have a big impact on your overall value. This can be both good and bad: you can make more money if you're right about the direction of the price change; but if you're wrong, it can cost you more than an un-leveraged product would have.
To get started you need to understand technical analysis and fundamental analysis. Technical analysis looks at charts of past prices and volume to find patterns that will predict future price movements; fundamental analysis looks at economic factors like interest rates and GDP growth rates to predict what might happen with currency prices in the future.
Be aware that small changes have a big impact
Forex is a leveraged product, meaning that small changes in price can have a big impact on your profit or loss. This can be both good and bad: you can make more money if you're right about the direction of the price change; but if you're wrong, it can cost you more than what it would trading without leverage.
Declutter your chart
Oftentimes traders get excited with all the bells and whistles that come with indicators, oscillators, trading signals, market updates, this, that, and the other. Your computer screens will start looking like the Starship Enterprise dashboard.
A clear chart is a clear mind. Only apply the indicators and tools that you absolutely need in order to avoid being overwhelmed or confused. This does not mean that you shouldn’t use indicators or trading signals. They are valuable tools in making good trading decisions. Just choose the ones that are necessary.
Some More Things You Didn't Know about Forex
So we've shared the 10 things you didn't know about trading in foreign currency, some forex secrets, tips, and fun forex facts. Have you had enough yet? I know, all these fun facts are fascinating! Not to mention that they are great to have in your back pocket of forex knowledge to start an interesting conversation. So we’ve put together a few more forex nuggets of wisdom below.
More Forex Facts
- The classification of traders is an intriguing aspect of forex. Traders are divided between ‘bulls’ or those who are optimistic about the market's upward direction, and ‘bears’ - traders who are pessimistic and think the market will decline. These terms come from the fact that bears swipe downward while bulls strike upward.
- ‘Spot trading’ refers to the instant exchange of currencies that happen right away and ‘on the spot’.
- In forex trading, the term ‘point’ is frequently used to refer to one-tenth of a pip or the fifth decimal place in the value of a currency.
- FX trading has evolved significantly thanks to the internet. Instead of on the exchange floors, the majority of FX transactions happen online. This development has made it easier for people who are interested in forex trading without having to travel to an exchange floor. This allows individuals to use their computer systems instead of going through a broker or bank.
- The majority of forex trading is speculative, meaning that traders are buying and selling currencies based on their expectations of future price movements. This differs from the stock market, where shares are bought and sold based on their past performance.
Did you find this information useful or interesting? Want to learn more about how forex trading tools such as trading signals can help you? Read some more of our educational posts on useful forex tools and trading signals. Sign up to our trading signals Telegram channel and get started trading!
