The Role of Forex in the Global Economy

The foreign exchange market directly impacts every bond, equity, private property, manufacturing asset and any investments accessible to foreign investors. Foreign exchange rates play a major role in financing government deficits, equity ownership in companies and real-estate holdings. Foreign exchange trading helps determine who hires and fires employees, and who owns the banks at which you maintain your corporate and personal accounts. The currency in your pocket is literally stock in your country, and like a share, its value fluctuates on the international market. Over time, the foreign exchange market has been an invisible hand that guides the sale of goods, services and raw materials on every corner of the globe. The forex market was created by necessity. Traders, bankers, investors, importers and exporters recognized the benefits of hedging risk, or speculating for profit. The fascination with this market comes from its sheer size, complexity and almost limitless reach of influence.
The market has its own momentum, follows its own imperatives, and arrives at its own conclusions. These conclusions impact the value of all assets -it is crucial for every individual or institutional investor to have an understanding of the foreign exchange markets and the forces behind this ultimate free-market system.

Forex vs. Stocks
Historically, the majority of the general public has viewed the securities markets as an investment vehicle. In the last ten years securities have taken on a more speculative nature. This was perhaps due to the downfall of the overall stock market as many security issues experienced extreme volatility because of the irrational exuberance displayed in the marketplace. The implied return associated with an investment was no longer true. Many traders engaged in the day-trader rush of the late 90's only to realize that, from a leverage standpoint, it took quite a bit of capital to day-trade, and the return, while potentially higher than long-term investing, was not exponential. After the onset of the day-trader rush, many traders moved into the futures stock index markets where they found they could leverage their capital greater and not have their capital tied up when it could be earning interest or making money somewhere else. Like the futures markets, spot currency trading is an excellent vehicle for pattern day-traders who desire to leverage their current capital to trade. Spot currency or forex trading provides more options, greater volatility and stronger trends than currently available in stock futures indexes. Former securities day-traders have an excellent home in spot foreign exchange (forex).