Currency trading dummies

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Information published on this website and in our external communications is factual and for information purposes only. It does not constitute financial advice under the Financial Services and Markets Act 2000. The global monetary system is what’s called a Fiat system in which money is a storage medium for purchasing power and a substitute for barter. Money then enables enterprises to develop and societies to establish subspecializations, thus fostering a sort of dynamic progression toward the future. For example, before there was money, anyone who owned land produced their own necessities and traded the surplus with other people for the things they needed.

Money changed that system by its inherent ability to store purchasing power, thus giving people the opportunity to make plans for the future and to specialize. In other words, if you’re a good wheat farmer, then you can specialize in wheat, and buy your equipment, hire workers, and look for neighbors’ land to buy to expand your wheat farm. Most of the world’s money is called fiat money, meaning it is accepted as money because a government says that it’s legal tender, and the public has enough confidence and faith in the money’s ability to serve as a storage medium for purchasing power. A fiat system is based on a government’s mandate that the paper currency it prints is legal tender for making financial transactions.

Legal tender means that the money is backed by the full faith and credit of the government that issues it. In other words, the government promises to be good for it. Fiat money is the opposite of commodity money, which is money that’s based on a valuable commodity, a method of valuation that was used in the past. At times, the commodity itself actually was used as money. For instance, the use of gold, grain, and even furs and other animal products as commodity money preceded the current fiat system.

Currency trading can be really exciting for a day trader. With every trade and every blip in exchange rates, you have new opportunities to make money. Currency is a bigger, more liquid market than the U. It’s often referred to as the forex market, short for foreign exchange. Foreign currency may be an attractive place to store some of your trading cash, and it can be a great asset to day trade. Here’s another neat thing about the currency market: Some types of currency trades are tax free.