Embarking on your forex trading journey might seem daunting at first, but fret not! We’ve put together all the information you need to get started.
This guide is your friendly companion, packed with real-world examples, easy-to-grasp basics, newbie-friendly strategies, handy tips, and a step-by-step roadmap to kickstart your forex adventures.
Foreign exchange trading, or forex trading, is the process of buying and selling currencies in the global financial markets. It is one of the largest and most liquid markets in the world, with an average daily trading volume estimated to exceed USD$7 trillion. Unlike traditional stock markets, forex trading operates 24 hours a day, five days a week, allowing traders to participate in the market at any time.
Understanding currency pairs
Forex trading involves the exchange of one currency for another at an agreed-upon price. This is done with the aim of profiting from fluctuations in exchange rates. Currencies are traded in pairs, where one currency is bought while the other is sold. The most commonly traded currency pairs, or ‘the majors’ as they’re more commonly referred to, include EUR/USD (Euro/US Dollar), GBP/USD (British Pound/US Dollar), AUD/USD (Australian Dollar/US Dollar), NZD/USD (New Zealand Dollar/US Dollar), USD/JPY (US Dollar/Japanese Yen), USD/CAD (US Dollar/Canadian Dollar), and USD/CHF (US Dollar/Swiss Franc).
Examples of other currency pairs, most often referred to as “crosses”, are AUD/JPY (Australian Dollar/Japanese Yen), GBP/NZD (British Pound/New Zealand Dollar), EUR/CAD (Euro/Canadian Dollar) and so forth.
And finally, less-traded currency pairs are referred to as “exotics”. Examples of these include USD/TRY (US Dollar/Turkish Lira), USD/HUF (US Dollar/Hungarian Forint). It’s important to note that exotic pairs tend to have wider spreads and higher volatility compared to major and minor pairs.
Uses of the forex market
The forex market is used by many players, for many different reasons. Retail traders aim at buying or selling a currency to take advantage of short-term fluctuations in price, whereas corporates who conduct regular international trade often use the forex market to hedge against their local currency weakening.
Large-scale players such as hedge funds or investment firms, will use the foreign exchange market to take advantage of divergences in interest rates between two nations in the form of a carry trade.
For more information on the types of forex trading, head to Part Four.
Reading Currency Pair Quotes
Currency pair quotes consist of two prices: the bid price and the ask price. The bid price represents the price at which you can sell the base currency, while the ask price represents the price at which you can buy the base currency. The difference between the bid and ask prices is known as the spread, which represents the broker's profit margin.
In forex trading, currency pairs are quoted in pips, short for "price interest point," representing the smallest possible price movement. For most major currency pairs, prices are quoted with four decimal points, indicating a change of 1/100 of one percent or 1 basis point. However, the Japanese Yen is an exception, trading with only two decimal points.
For instance, if the bid price for the EUR/USD pair is quoted as 1.19040, this breakdown refers to the five decimal places displayed on the market watch.
In order to trade the foreign exchange market effectively, you need to understand the nuts and bolts of how it works.
The forex market is decentralised, meaning that there is no central exchange where all transactions take place. Instead, trading occurs over-the-counter (OTC) through a global network of banks, financial institutions, and individual traders. Some of the larger players in the forex market are Deutsche Bank, UBS, Citi Bank, RBS and more.
Prices are determined by supply and demand dynamics, with exchange rates fluctuating based on economic indicators, geopolitical events, and market sentiment.
How the system works
Market makers are key players in the forex world. They establish both the buying (bid) and selling (ask) prices, which are visible to everyone on their platforms. Their role extends to facilitating transactions with a diverse clientele, including banks and individual traders. By consistently quoting prices, they inject liquidity into the market. As counterparties, market makers engage in every trade, ensuring a seamless flow: when you sell, they buy, and vice versa.
Electronic Communications Networks (ECNs) play a crucial role in forex trading by aggregating prices from various market participants like banks, market makers, and fellow traders. They showcase the most competitive bid and ask quotes on their platforms, drawing from this pool of prices. While ECN brokers also act as counterparts in trades, they differ from market makers in their settlement approach rather than fixed pricing. Unlike fixed spreads, ECN spreads fluctuate based on market activity, sometimes even hitting zero during peak trading times, especially with highly liquid currency pairs like the majors.
Direct Market Access (DMA) empowers buy-side firms to directly access liquidity for securities they aim to buy or sell through electronic platforms offered by third-party providers. These firms, clients of sell-side entities like brokerages and banks, maintain control over trade execution while leveraging the infrastructure of sell-side firms, which may also function as market makers.
Straight Through Processing (STP) represents a significant leap in trading efficiency, transitioning from the traditional T+3 settlement to same-day settlement. One of its notable advantages is the reduction of settlement risk. By expediting transaction processing, STP enhances the likelihood of timely contract settlement. Its core objective is to streamline transaction processing by electronically transmitting information, eliminating redundant data entry and enabling simultaneous dissemination to multiple parties when necessary.
Choosing a Broker
When selecting a forex broker, it's essential to not only consider the fees, but also regulatory compliance, trading platform, and customer support. Look for brokers regulated by reputable authorities such as the Financial Conduct Authority (FCA) in the UK or the Commodity Futures Trading Commission (CFTC) in the US.
Here at Fusion Markets we’re dedicated to offering a quality service with an affordable fee structure. You can learn more about trading forex or view our licences.
Setting Up Your Trading Account
Once you've chosen a broker, the next step is to open a trading account. This typically involves completing an online application, submitting identification documents, and funding your account. Forex brokers offer various account types to suit different trading preferences, including standard accounts, mini accounts, and demo accounts for practice trading.
Identify Your Trading Style
Before developing a trading strategy, it's essential to identify your trading style, whether it's day trading, swing trading, or position trading. Your trading style will dictate the timeframe you trade on and the types of setups you look for in the market.
Below are the types of pros and cons of each trading style:
Types of Analysis
Fundamental Analysis
Unlike technical analysis, which primarily relies on historical price data, fundamental analysis examines economic indicators, monetary policies, geopolitical events, and other macroeconomic factors to gauge the strength and direction of a currency's movement.
Central to fundamental analysis is the understanding that currency prices are ultimately driven by supply and demand dynamics, which in turn are influenced by broader economic conditions. For example, factors such as interest rates, inflation rates, GDP growth, unemployment levels, and trade balances can all impact a currency's value.
One of the key concepts in fundamental analysis is interest rate differentials. Central banks use interest rates as a tool to control inflation and stimulate economic growth. Currencies with higher interest rates tend to attract more investors seeking higher returns on their investments, leading to an appreciation in their value relative to currencies with lower interest rates. Traders closely monitor central bank announcements and economic reports to anticipate changes in interest rates and adjust their trading strategies accordingly.
Another important aspect of fundamental analysis is the assessment of economic indicators. These indicators provide insights into the health of an economy and can influence currency prices. For example, strong GDP growth and low unemployment rates are typically associated with a robust economy and may lead to appreciation in the currency. Conversely, high inflation or rising unemployment may weaken a currency.
Geopolitical events can also have a significant impact on currency prices. Political instability, conflicts, trade tensions, and other geopolitical factors can create uncertainty in the market and cause fluctuations in currency prices. Traders must stay informed about geopolitical developments and assess their potential impact on currency markets.
While fundamental analysis provides valuable insights into the long-term trends and direction of currency markets, it is important to note that currency prices can also be influenced by short-term factors and market sentiment. Therefore, traders often use a combination of fundamental and technical analysis to make informed trading decisions.
Technical Analysis
Technical analysis involves studying historical price data and using various charting tools and indicators to identify patterns and trends. Common technical analysis tools include moving averages, trendlines, and oscillators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD). Traders use technical analysis to make short-term trading decisions based on price action and market momentum.
Technical analysis is a cornerstone of forex trading, offering traders a systematic approach to interpreting market dynamics and making informed trading decisions based on historical price movements and market statistics. Unlike fundamental analysis, which focuses on economic indicators and macroeconomic factors, technical analysis relies solely on price data and trading volume to forecast future price movements.
At its core, technical analysis is based on the efficient market hypothesis, which posits that all relevant information is already reflected in an asset's price. Therefore, by analysing past price movements, traders believe they can identify recurring patterns and trends that may indicate potential future price directions.
One of the fundamental concepts in technical analysis is that of support and resistance levels. Support represents a price level where buying interest is sufficiently strong to prevent the price from falling further, while resistance is a level where selling pressure is sufficient to halt an upward price movement. Traders use these levels to identify potential entry and exit points for their trades.
Example of support and resistance areas on EURUSD Daily chart
Another key tool in technical analysis is chart patterns, which are formed by the recurring movements of prices over time. Common chart patterns include triangles, flags, and head and shoulders formations. By recognising these patterns, traders attempt to predict future price movements and adjust their trading strategies accordingly.
In addition to chart patterns, technical analysts also utilise technical indicators to aid in their analysis. These indicators are mathematical calculations based on price and volume data and are used to identify trends, momentum, volatility, and other aspects of market behavior. Popular technical indicators include moving averages, oscillators like the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD), and trend-following indicators such as the Average Directional Index (ADX).
While technical analysis is a powerful tool for forex traders, it is not without its limitations. Critics argue that technical analysis is subjective and prone to interpretation bias, as different analysts may draw different conclusions from the same set of data. Moreover, technical analysis does not account for fundamental factors such as economic news and geopolitical events, which can have a significant impact on currency prices.
Despite these limitations, technical analysis remains an indispensable tool for forex traders worldwide. By understanding and applying technical analysis principles, traders can gain valuable insights into market trends and dynamics, allowing them to make more informed trading decisions and improve their overall trading performance.
Risk Management
Setting Stop-Loss and Take-Profit Orders
Stop-loss orders are used to limit losses by automatically closing a trade at a predetermined price level. Take-profit orders, on the other hand, are used to lock in profits by closing a trade when the price reaches a specified target. By using stop-loss and take-profit orders, traders can manage risk and control their downside exposure.
Position Sizing
Position sizing involves determining the appropriate amount of capital to risk on each trade based on factors such as account size, risk tolerance, and the probability of success. A common rule of thumb is to risk no more than 1-2% of your trading capital on any single trade to preserve capital and avoid significant drawdowns.
Your Strategy
Once you’ve determine what style of trading would suit you best, you now need to develop a strategy. There are thousands of different strategies out there so you have the choice of learning one from someone else, or developing your own.
Regardless, some common strategies include:
Trend Following Strategies
Trend following strategies in forex trading involve identifying and capitalising on established market trends. Traders employing this approach aim to enter positions in the direction of the prevailing trend, whether it's upward (bullish) or downward (bearish), and ride the momentum for as long as possible. These strategies typically utilise technical indicators, such as moving averages and trendlines, to confirm the direction of the trend and determine optimal entry and exit points. The goal of trend following strategies is to capture significant portions of a trend's movement while minimising losses during market reversals.
NZDUSD Daily Chart showing optimal entry points to go short during a bearish trend.
Range-bound strategies
Range-bound strategies in forex trading focus on exploiting price movements within defined ranges or boundaries. Traders employing this approach identify periods when a currency pair is trading within a relatively narrow price range, bounded by support and resistance levels. Instead of following a trend, range-bound traders seek to buy near support and sell near resistance, aiming to profit from the price being restricted to the range highs and lows.
USDJPY 15min chart with optimal buy and sell signals for a range-bound strategy
Breakout Strategies
Breakout trading strategies in forex involve capitalising on significant price movements that occur when an asset's price breaks through predefined support or resistance levels. Traders employing this approach wait for a clear breakout from the established range and then enter positions in the direction of the breakout, anticipating continued momentum in that direction. Breakout traders typically use technical indicators, such as trendlines, moving averages, and volatility measures, to identify potential breakout opportunities and confirm the strength of the breakout. The goal of breakout trading strategies is to capture rapid price movements and profit from the subsequent price trend.
Example of an opportune entry for a bullish breakout trade on EURUSD 4-hour chart
The key to developing a strategy that works for you is by studying the charts and thinking about what makes sense to you. If you think patterns make sense as they identify areas of consolidation which can lead to a breakout, then pattern trading could be a good fit for you.
It’s important for any trader to stick with their chosen strategy and not switch strategies every time they encounter a losing streak.
Maintain a Trading Journal
Keeping a trading journal allows traders to track their performance, analyse their trades, and identify areas for improvement. A trading journal should include details such as entry and exit points, trade rationale, risk-reward ratio, and emotional state. By reviewing past trades, traders can learn from their mistakes and refine their trading strategies over time.
Avoid Overleveraging
While leverage can amplify profits, it also increases the risk of significant losses. Avoid overleveraging by using leverage cautiously and only trading with capital you can afford to lose. A general rule is to keep leverage levels below 10:1 to mitigate risk effectively. The best position is cash. You should ensure you’re only taking the most high-probability set-ups that are in-line with your strategy.
Stay Disciplined
Maintain discipline in your trading approach by sticking to your trading plan and avoiding emotional decision-making. Avoid chasing losses or deviating from your strategy based on fear or greed. Consistency and discipline are key to long-term success in forex trading. Sometimes it’s best to walk away from the charts and come back the next day with a clearer head.
Manage Emotions Effectively
Trading can be emotionally challenging, with the potential for both euphoria and despair. Learn to manage your emotions effectively by practicing mindfulness techniques, maintaining a positive mindset, and taking regular breaks from the market. Remember that losses are a natural part of trading, and it's essential to stay resilient and focused on your long-term goals.
Be realistic with your expectations
Trading can be very lucrative, but it can also be very costly. Traders should be realistic in their expectations – what % will you aim for each month? How much are you going to risk? Risking 20% of your equity per trade will be great on winning trades, but it won’t take long for you to eradicate your entire balance on a handful of losses. Whereas risking 1% equity per trade will allow you to conserve as much capital as possible, whilst still gaining 1%+ per winning trade.
To continue your forex trading education, consider exploring the following resources:
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In the fast-paced world of forex trading, having access to a reliable and efficient trading platform is paramount to your trading success. Among the titans of the forex trading platform world, two names stand out: cTrader and MetaTrader 4/5 (MT4 and MT5). These platforms have amassed an extensive user base and earned their loyal followings.
In this article, we'll delve into the intricacies of each platform, comparing their features, advantages, and limitations, to help you determine which platform is right for you.
MetaTrader is the brainchild of MetaQuotes Software. The company introduced the first version, MetaTrader 4 (MT4), in 2005. Its successor, MetaTrader 5 (MT5), followed in 2010, bringing a host of new features and capabilities to the table.
cTrader was launched by Spotware Systems Ltd. in 2011, aiming to provide traders with a platform that offers a user-friendly interface and advanced functionalities. cTrader's main focus is on creating a seamless trading experience for both beginner and experienced traders alike.
One of the most significant factors in a trading platform's popularity is its user interface (UI). Despite MT4 being somewhat outdated compared to cTrader's modern design, both offer clean and intuitive interfaces, making them relatively easy for traders to navigate. However, they have different approaches when it comes to customisation.
cTrader takes the lead in UI customisation, allowing traders to personalise their workspace extensively. Users can arrange and resize various windows, add or remove trading indicators, and set up multiple charts on a single screen. This level of flexibility empowers traders to create an environment tailored to their specific trading needs.
On the other hand, MetaTrader, especially MT4, has a more rigid UI, with limited customisation options. While MT5 improved in this aspect, it still lags behind cTrader's superior customisation features.
In terms of charting and technical analysis, both platforms deliver robust solutions. Traders can access a wide range of chart types, timeframes, and drawing tools on both cTrader and MetaTrader.
cTrader stands out with its intuitive charting package, providing more than 70 pre-installed indicators and a smooth drawing experience. It also offers Level II pricing data with its 3 depth of market (DoM) types (Standard, Price, VWAP), giving traders a greater insight into market depth and liquidity.
MetaTrader, however, remains a popular choice for technical analysis enthusiasts, thanks to its massive library of third-party indicators and analytical tools. This vibrant community-driven ecosystem ensures that traders have access to an extensive arsenal of tools to refine their strategies.
Let's dive into the specifics:
Chart Types: MetaTrader 4 supports three fundamental chart types, namely Bar, Line, and Candlestick.
Timeframes: Nine distinct timeframes, spanning from 1 minute to 1 month.
Analytical Objects: 24 analytical objects, including lines, channels, shapes, arrows, and essential Gann and Fibonacci tools.
Technical Indicators: 30 built-in technical indicators. Furthermore, traders can explore over 2,000 free custom indicators and access 700 premium indicators available in the Code Base.
Chart Views: The platform allows traders to open an unlimited number of charts simultaneously. Moreover, traders can personalize their charts by creating templates that define specific attributes such as color schemes, chart types, scales, line studies, and applied indicators.
Chart Types: cTrader comes with 8 chart types, but also includes additional variations such as tick and pip charts. These chart types include Bar, Line, Candlestick, Heikin-Ashi, HLC, Dot, Tick (configurable with 27 settings), Renko (with 19 settings), and Range-based charts (with 22 settings).
Timeframes: cTrader features 26 timeframes with the standard chart and over 50 timeframes and six zoom levels across all chart types (including tick and pip charts).
Analytical Objects: The platform boasts 33 analytical objects.
Technical Indicators: cTrader offers 70 built-in technical indicators.
Chart Views: cTrader introduces Chart Views, allowing traders to detach charts and use them as separate tradable desktop applications across multiple screens. Additionally, ChartShot enables traders to share trading examples and strategies relatively easily.
Now that we've got a comprehensive view of the differences in charting, let's delve into the nuances of order placement in MetaTrader and cTrader, highlighting their distinct approaches and functionalities:
The next significant aspect we need to consider is automated trading. In MetaTrader applications, both MT4 and MT5, traders can utilise Expert Advisors (EAs), which are manually coded programs designed for automated tasks, such as technical analysis of price data and executing positions on specific instruments.
When comparing MT4 to MT5, the primary difference between their Expert Advisors lies in the programming language they employ. Since MQL4 has been in use for a longer time than MQL5, there is a more extensive collection of pre-written scripts and codes available for traders to create their personal Expert Advisors, even if they lack programming knowledge. On the other hand, MQL5 is a simpler programming language, making it easier for traders to create new scripts themselves.
Regarding cTrader, it also offers similar programs known as cBots, which function similarly to Expert Advisors. As mentioned earlier, cTrader uses the widely recognised C# programming language, theoretically making it the most versatile among the three languages (MQL4, MQL5, and C#) with a larger consumer base.
However, in reality, cBots are less popular than Expert Advisors (EAs), and the reason for this is that the online trading community supporting EAs is much larger than that of cBots. Consequently, there are more pre-existing templates available for MT4/MT5 compared to cTrader.
Mobile trading has become an integral part of the modern trading experience. Both platforms offer mobile applications for iOS and Android devices, enabling traders to stay connected to the markets on the go.
cTrader's mobile app is widely acclaimed for its user-friendly design and seamless functionality. It provides real-time quotes, interactive charts, and order execution capabilities, giving traders full control over their portfolios from the palm of their hand.
MetaTrader's mobile app, too, is highly regarded and offers a range of features for on-the-go trading. It allows traders to access their accounts, execute trades, and monitor markets in real time.
In conclusion, both cTrader and MetaTrader are powerful trading platforms, each with its own set of unique features and strengths. cTrader shines in its user-friendly interface, extensive customisation options, and array of features. On the other hand, MetaTrader's widespread popularity gives traders a great pool of resources to draw on and stronger community support, while having all the tools needed to be successful in the markets.
Ultimately, the choice between cTrader and MetaTrader depends on individual preferences, trading styles, and specific needs. Traders should consider their asset preferences, technical analysis requirements, and whether they prefer a larger community-driven ecosystem or a more user-friendly interface with more features. Regardless of the choice, both platforms have significantly contributed to enhancing the trading experience for millions of traders worldwide.
Are you ready to talk about spreads? Sure, you might think that there is nothing you have not heard before.
John Wooden, an American basketball coach, said it best: “The eight laws of learning are explanation, demonstration, imitation, repetition, repetition, repetition, repetition, repetition.”
So, hear me out. The spread is one of the most important concepts in forex trading, and understanding how it works can have a significant impact on your trading game.
First things first, let's define what a spread is. In forex trading, a spread is the difference between the bid and ask price of a currency pair. The bid price is the price at which you can sell the currency, while the ask price is the price at which you can buy it.
The size of the spread can vary depending on a number of factors, including the volatility of the market, the liquidity of the currency pair, and the broker you are using. In general, the more volatile and illiquid a currency pair is, the larger the spread will be.
Now, picture this: you have finally decided to dip your toe into the exciting world of forex trading. You have done your research, chosen a broker, and you are ready to make your first trade. But wait - what is this? The spread on your chosen currency pair is wider than the Grand Canyon. Suddenly, your dream of becoming a successful forex trader starts to feel like a distant memory.
Okay, maybe that is a bit dramatic. But the point is, the spread can make a substantial difference in your forex trading experience. And when it comes to spreads, tighter is always better.
For starters, tighter spreads mean lower trading costs. Some brokers might increase their spreads as part of their fee, which is why on some account types, the commissions are baked into the spreads. Remember that there are also several factors that might have an impact on the spreads. If the spread is wider, that means you are paying more in fees every time you buy or sell a currency pair. Over time, those fees can really add up, eating into your profits and making it harder to achieve your trading goals.
But it is not just about the cost. Tighter spreads can also improve your chances of making a profit. When the spread is wider, it means there is a larger gap between the bid and ask price. This can make it harder to enter and exit trades at the price you want.
For example, if you are trying to buy a currency pair, but the ask price is much higher than the bid price, you might end up paying more than you intended. Conversely, if you are trying to sell a currency pair, but the bid price is much lower than the ask price, you might end up receiving less than you wanted. These slight differences may not seem like a big deal, but over time, they can make a significant impact on your overall profitability.
It is important to keep in mind that not all brokers offer the same spreads. Some brokers may advertise low spreads, but then widen them during periods of high volatility or low liquidity. That is why it is important to do your research and choose a reputable broker with consistent pricing.
Of course, you want a broker who is open and honest about their pricing and fees, and who is willing to provide you with the tools and information you need to make smart trading decisions.
And that is where our new tool comes in. At Fusion Markets, we are committed to providing our clients with the best possible trading conditions and that means being upfront about pricing and fees. That is why we designed our new Historical and Live Spreads tool.
This tool allows traders to view the historical spreads of a particular currency pair over a specified time frame, as well as the current live spreads. This information can be incredibly valuable in helping you make informed decisions about when to enter and exit trades. No more surprises, no more hidden fees – just transparent, competitive pricing.
Think about it - with this tool, you can see how spreads have fluctuated over time, and get a sense of what a "normal" spread looks like for a particular currency pair. This can help you identify when spreads are wider than usual and avoid trading during times when you might be paying more in fees than you need to.
And that is not all - the historical and live spreads tool also helps to promote transparency in the forex industry. We believe that our clients deserve to know exactly what they are paying in fees, and that is why we are committed to providing this information in a clear and accessible way.
If you want to maximise your profits and develop a winning trading strategy, you owe it to yourself to check out our new tool. With its help, you can trade with greater confidence, knowing that you are getting the best possible pricing and keeping more of your hard-earned profits.
So, what are you waiting for? Try out our Historical and Live Spreads Tool today and see how it can help take your trading to the next level. Trust us - you will not regret it!
For more detailed information about our Spreads tool download our guide.
Interbank FX conversion rates are now at your fingertips. Our latest bank deposit method allows our clients to deposit 30+ different currencies and receive some of the best FX rates on the market. This means you’ll pay less when depositing your local currency into your trading base currency, putting the savings back into your trading bankroll.
See below to see the full list of the 30+ currencies accepted for this funding method.
To
receive interbank FX conversion rates, login to your Client Hub and click
“Bank Transfer” on the right of the screen.
Select
your trading account you’d like to deposit into (e.g. USD, GBP, AUD), and
deposit into the bank address listed.
When we receive your fund they’ll then be converted to your base currency account at industry-leading FX conversion rates.
Yes! Click on the icon on the left in your payments sections to see access to our older bank transfer methods. You still may want to use this method if your country has local bank funding options.
Depending on your bank and region, your deposit can from 1-5 business days to process. You’ll receive an email from us once your funds are ready to trade.
This functionality will be coming soon!
This is something we’re looking to integrate in the future, at the moment, we’ll only be accepting deposits using this method.
If you’d like to know more, please contact our help team - they’re available 24/7.
Foreign exchange (FOREX) goes through ups and downs. Some events had stripped bare the possible volatility of the market, causing fear in the hearts of investors. Here are some top events since the year 2000 that caused chaos in the markets.
The Forex Probe of 2013 was a scandal that revealed how international banks had been working together for at least a decade to tweak Forex market exchange rates.
Again, this event was all about investor fears of market manipulation as a result of bank collusion. It wasn’t easy to trust the market again after such practices were revealed.
Four major banks admitted involvement, but the 2013 Forex Probe remains one of the most impactful foreign exchange events since 2000, even though the banks paid up $6 billion in fines.
In 2013, the Greek economy revealed its fragility, although it already showed some cracks during the 2007 worldwide financial crisis.
It looked like Greece was going into an irreparable downfall. Still, the European Union overextended itself by granting it a generous loan of £68 billion. While the EU might have saved Greece, this move would remain one of the top events in Forex history for such a large amount of money changing hands.
The consequences of the crisis could still be felt as Greece’s debt problems reverberated in 2015. Because Greece couldn’t reach its deal, some currencies surged, such as the Japanese Yen and Swiss Franc found which found themselves on the rise.
However, other currencies didn’t fare so well in 2015. The Euro plunged in the Asian trading session. The dollar also experienced a one-month low of 122.10 yen.
Political uncertainty in one country can affect many other countries, and sometimes the impact lasts for years. That is why the Greek Debt Crisis of 2013 makes it to our list of the most significant Forex events in the new millennium.
Since we have already looked at what a flash crash is about, we can go straight to how the Sterling Pound lost its value within seconds on the 7th of October 2016.
A fat finger error was suspected, but the Bank for International Settlements ruled that there was no proof it was the case. Further investigations revealed that algorithmic trading programs had triggered the crash. The algorithm issue was paired with traders who didn’t want to take much risk.
Brexit 2016 caused panic in the European Union, especially when its economic effects were felt. Of course, it also had an impact on the foreign exchange market.
The story of Britain’s breakup with the European Union was one of the top events in politics and Forex history. It went to show just how intricately related these aspects were.
The UK’s unexpected move was what created the panic. Understandably, something so unprecedented had to affect the market. Right before the votes were out, the British pound sterling was moving in an upswing trend. However, it ended in a closing of 8% down for the GBP/USD pair on that day.
A slide preceded the Brexit-caused slump for about a year.
You may believe that Apple is mainly influential in the technology market. Think again. Its reaches have some effects on the foreign exchange market, as well.
Apple’s statement in January 2019 that emphasised the Chinese economy’s struggle had several investors selling their most volatile currencies.
When investors lose confidence in the Chinese economy, their trust in the AUD and JPY also fluctuates. After all, Australia is its most important trading partner.
Therefore, a simple statement from Apple in 2019 has caused one of the most significant foreign exchange crashes of recent years.
In the same year, in February, the Swiss franc also suffered a crash. However, some considered this an inconsequential event.
The Swiss Franc experienced a significant drop during the Asian trading session on the 10th of February. It dropped against the US dollar and other major peers.
When the Japanese markets closed for National Foundation Day, the Swiss francs suffered from a lack of liquidity.
Another critical Swiss franc crash happened a few years prior to this, in January 2015. The flash rally, as some call it, occurred after the Swiss National Bank announced that its currency would no longer be pegged at 1.20 against the Euro. Because of this, the franc went up by 20% against not only the Euro but also some major currencies.
The Black Swan event certainly caused a stir in the financial markets. Moreover, it points to the fall of the most popular of cryptocurrencies - Bitcoin.
So, when the cryptocurrency fell to almost 4970 USD per coin, it caused sheer panic among investors. That was an 80% loss in value. For comparison, its 2017 value was at 19716 USD.
Bitcoin was not alone in creating fear among investors, as Ethereum also dipped from 285 USD to 110 USD. COVID-19 was believed to be the cause of the plunge.
Because the cryptocurrency crisis of 2022 was considered a Black Swan event, it affected other financial markets, including foreign exchange.
The fear generated by black swans is especially fearsome due to their ability to wipe out entire accounts. Reliance on standard forecasting tools can fail to predict potential damages, and that is what makes black swan events so rare and devastating.
The COVID-19 pandemic continues to make its effects known in various industries worldwide. During that crisis economic growth expectations were downgraded in fear that major economic sectors had to be shut down due to the increasing coronavirus cases. That uncertainty reduced the demand for local currencies and investment funds. In addition, it impacted exchange rates and the fluctuating value of the US dollar as a world reserve currency.
As a result, economic and political measures created significant changes worldwide and left a mark in Forex history.
While there may be more FOREX-related events in the past and the upcoming future that will affect the market, the above are the ones that still have tangible impacts in the past few years. It is crucial for forex traders to stay ahead of an ever-changing market, and one of the ways to achieve it is to understand its history.
To access the world’s markets easier and at a lower cost get a live account with Fusion Markets.
