What is FOREX
And why is it sometimes dangerous to trade on it
When someone says the phrase "FOREX exchange", experienced traders immediately understand that they are facing a person who is poorly versed in stock trading. The fact is that exchanges are platforms for trading any assets. There are stock exchanges such as NYSE (New York Stock Exchange), LSE (London Stock Exchange); LME (London Metal Exchange); as well as universal exchanges on which a number of markets are traded, for example, the Moscow Exchange, MOEX (assets of the stock, currency, derivatives and money markets are traded on it).
As for FOREX (Foreign Exchange, literally "foreign exchange"), it is not an exchange, but the international interbank foreign exchange market. It is also wrong to call it stock, since stocks, bonds, shares of investment funds and depositary receipts are traded on the stock market.
What is the FOREX market
FOREX is an international market where banks buy and sell currencies of interest to them at free rates. Apart from banks, participants in such trades can only be very large companies that need to make conversion transactions in order to conduct their activities. The minimum lot for transactions with currency is several million dollars, and access to trading itself costs a lot of money. Thus, it is at least inexpedient for individuals to make transactions on FOREX.
The first prerequisite for the emergence of the FOREX market was the abolition of the gold standard and the Bretton Woods monetary system that existed in those years, according to the rules of which only one currency - the US dollar - was backed by gold, and all other participants in this system provided their currencies with the US dollar. The gold standard was abolished in 1971 by US President Richard Nixon`s decree. Like mentioned here https://nsbroker.com/en/trading-for-beginners/how-choose-best-forex-trading-strategy, the abolished gold standard was replaced by the Smithsonian Agreement, which implied a wider range of currency fluctuations - from 1 to 9%.
But such a resolution did not suit everyone, and in the same 1971 a new agreement was adopted in Jamaica, guided by which the currency could be converted with an even wider range of fluctuations, but with a certain peg to gold.
This innovation also did not satisfy everyone, and in 1975 another meeting was devoted to this problem, which was organized by German Chancellor Helmut Schmidt and French President Valerie Giscard D`Estaing. The USA, Great Britain, Japan and Italy took part in it, and a year later Canada - the "Big Seven" countries joined the discussion of the issue, following the recommendations of which, in 1978 the IMF adopted a number of amendments to its charter. From that moment on, the countries participating in the new monetary system freed their currencies from pegging to both gold and the US dollar, performing transactions at a free exchange rate. This was the beginning of the history of the FOREX currency exchange market.