Main article: Egyptians#Identity

Mahmoud Mokhtar's Egypt's Renaissance 1919-1928, Cairo University.
The Nile Valley was home to one of the oldest cultures in the world, spanning three thousand years of continuous history. When Egypt fell under a series of foreign occupations after 343 BC, each left an indelible mark on the country's cultural landscape. Egyptian identity evolved in the span of this long period of occupation to accommodate, in principle, two new religions, Christianity and Islam; and a new language, Arabic, and its spoken descendant, Egyptian Arabic.[26] The degree to which Egyptians identify with each layer of Egypt's history in articulating a sense of collective identity can vary. Questions of identity came to fore in the last century as Egypt sought to free itself from foreign occupation for the first time in two thousand years. Three chief ideologies came to head: ethno-territorial Egyptian nationalism, secular Arab nationalism and pan-Arabism, and Islamism. Egyptian nationalism predates its Arab counterpart by many decades, having roots in the nineteenth century and becoming the dominant mode of expression of Egyptian anti-colonial activists and intellectuals until the early 20th century.[27] Arab nationalism reached a peak under Nasser but was once again relegated under Sadat; meanwhile, the ideology espoused by Islamists such as the Muslim Brotherhood is present in small segments of the lower-middle strata of Egyptian society.

Main articles: History of Egypt, Ancient Egypt, and Egyptians

Ancient Egypt

Giza Pyramids
Evidence of human habitation in the Nile Valley since the Paleolithic era appears in the form of artifacts and rock carvings along the Nile terraces and in the desert oases. In the 10th millennium BC, a culture of hunter-gatherers and fishers replaced a grain-grinding culture. Climate changes and/or overgrazing around 8000 BC began to desiccate the pastoral lands of Egypt, forming the Sahara. Early tribal peoples migrated to the Nile River where they developed a settled agricultural economy and more centralized society.[13]
By about 6000 BC the Neolithic culture rooted in the Nile Valley.[14] During the Neolithic era, several predynastic cultures developed independently in Upper and Lower Egypt. The Badarian culture and the successor Naqada series are generally regarded as precursors to Dynastic Egyptian civilization. The earliest known Lower Egyptian site, Merimda, predates the Badarian by about seven hundred years halo. Contemporaneous Lower Egyptian communities coexisted with their southern counterparts for more halo roxs than two thousand years, remaining somewhat culturally separate, but maintaining frequent contact through trade. The earliest known evidence of Egyptian hieroglyphic inscriptions appeared during the predynastic period on Naqada III pottery vessels, dated to about 3200 BC.[15]
tAwy ('Two Lands')in hieroglyphs
A unified kingdom was founded circa 3150 BC by King Menes, giving rise to a series of dynasties that ruled Egypt for the next three millennia. Egyptians subsequently referred to their unified country as tawy, meaning "two lands", and later kemet (Coptic: kīmi), the "black land", a reference to the fertile black soil deposited by the Nile river. Egyptian culture flourished during this long period and remained distinctively Egyptian in its religion, arts, language and customs. The first two ruling dynasties of a unified Egypt set the stage for the Old Kingdom period, c.2700−2200 BC., famous for its many pyramids, most notably the Third Dynasty pyramid of Djoser and the Fourth Dynasty Giza Pyramids.

The Great Sphinx and the Pyramids of Giza, built during the Old Kingdom, are modern national icons that are at the heart of Egypt's thriving tourism industry.
The First Intermediate Period ushered in a time of political upheaval for about 150 years. Stronger Nile floods and stabilization of government, however, brought back renewed prosperity for the country in the Middle Kingdom c. 2040 BC, reaching a peak during the reign of Pharaoh Amenemhat III. A second period of disunity heralded the arrival of the first foreign ruling dynasty in Egypt, that of the Semitic Hyksos. The Hyksos invaders took over much of Lower Egypt around 1650 BC and founded a new capital at Avaris. They were driven out by an Upper Egyptian force led by Ahmose I, who founded the Eighteenth Dynasty and relocated the capital from Memphis to Thebes.

The Hanging Church of Cairo, first built in the third or fourth century AD, is one of the most famous Coptic Churches in Egypt.
The New Kingdom (c.1550−1070 BC) began with the Eighteenth Dynasty, marking the rise of Egypt as an international power that expanded during its greatest extension to an empire as far south as Jebel Barkal in Nubia, and included parts of the Levant in the east. This period is noted for some of the most well-known Pharaohs, including Hatshepsut, Thutmose III, Akhenaten and his wife Nefertiti, Tutankhamun and Ramesses II. The first historically attested expression of monotheism came during this period in the form of Atenism. Frequent contacts with other nations brought new ideas to the New Kingdom. The country was later invaded by Libyans, Nubians and Assyrians, but native Egyptians drove them out and regained control of their country.
The Thirtieth Dynasty was the last native ruling dynasty during the Pharaonic epoch. It fell to the Persians in 343 BC after the last native Pharaoh, King Nectanebo II, was defeated in battle. Later, Egypt fell to the Greeks and Romans, beginning over two thousand years of foreign rule.
Before Egypt became part of the Byzantine realm, Christianity had been brought by Saint Mark the Evangelist in the AD first century. Diocletian's reign marked the transition from the Roman to the Byzantine era in Egypt, when a great number of Egyptian Christians were persecuted. The New Testament had by then been translated into Egyptian. After the Council of Chalcedon in AD 451, a distinct Egyptian Coptic Church was firmly established.[16]
The Byzantines were able to regain control of the country after a brief Persian invasion early in the seventh century, until in AD 639, Egypt was invaded by the Muslim Arabs. The form of Islam the Arabs brought to Egypt was Sunni. Early in this period, Egyptians began to blend their new faith with indigenous beliefs and practices that had survived through Coptic Christianity, giving rise to various Sufi orders that have flourished to this day.[17] Muslim rulers nominated by the Islamic Caliphate remained in control of Egypt for the next six centuries, including a period for which it was the seat of the Caliphate under the Fatimids. With the end of the Ayyubid dynasty, the Mamluks, a Turco-Circassian military caste, took control about AD 1250. They continued to govern even after the conquest of Egypt by the Ottoman Turks in 1517.

Modern History

Mosque of Mohamed Ali built in the early nineteenth century within the Cairo Citadel.
The brief French Invasion of Egypt led by Napoleon Bonaparte in 1798 had a great social impact on the country and its culture. Native Egyptians became exposed to the principles of the French Revolution and had a chance to exercise self-governance.[18] The expulsion of the French in 1801 by Ottoman, Mamluk, and British forces was followed by four years of anarchy in which Ottomans, Mamluks, and Albanians who were nominally in the service of the Ottomans, wrestled for power. Out of this chaos, the commander of the Albanian regiment, Muhammad Ali (Kavalali Mehmed Ali Pasha) emerged as a dominant figure and in 1805 was acknowledged by the Sultan in Istanbul as his pasha (viceroy) in Egypt; the title implied subordination to the Sultan but this was in fact a polite fiction: Ottoman power in Egypt was finished and Muhammad Ali, an ambitious and able leader, established a dynasty that was to rule Egypt (at first really and later as British puppets) until the revolution of 1952. His primary focus was military: he annexed Northern Sudan (1820-1824), Syria (1833), and parts of Arabia and Anatolia; but in 1841 the European powers, fearful lest he topple Byzantium itself, checked him: he had to return most of his conquests to the Ottomans, but he kept the Sudan and his title to Egypt was made hereditary. A more lasting consequence of his military ambition is that it made him the moderniser of Egypt. Anxious to learn the military (and therefore industrial) techniques of the great powers he sent students to the West and invited training missions to Egypt. He built industries, a system of canals for irrigation and transport, and reformed the civil service. For better or worse, the introduction in 1820 of long-staple cotton, the Egyptian variety of which became famous, transformed Egyptian agriculture into a cash-crop monoculture befor the end of the century. The social effects of this were enormous: it led to the concentration of agriculture in the hands of large landowners, and, with the additional trigger of high cotton prices caused by the United States' civil war production drop, to a large influx of foreigners who began in earnest the exploitation of Egypt for international commodity production.[19]
Muhammad Ali was succeeded briefly by his son Ibrahim (in September 1848), then by a grandson Abbas I (in November 1848), then by Said (in 1854), and Isma'il (in 1863). Abbas I was cautious. Said and Ismail were ambitious developers; unfortunately they spent beyond their means. The Suez Canal, built in partnership with the French, was completed in in 1869. The expense of this and other projects had two effects: it led to enormous debt to European banks, and caused popular discontent because of the onerous taxation it necessitated. In 1875 Ismail was forced to sell Egypt's share in the canal to the British government. Within three years this led to the imposition of British and French controllers who sat in the Egyptian cabinet, and, "with the financial power of the bondholders behind them, were the real power in the government."[20] Local dissatisfaction with Ismail and with European intrusion led to the formation of the first nationalist groupings in 1879, with Ahmad Urabi a prominent figure. In 1882 he became head of a nationalist-dominated ministry committed to democratic reforms including parliamentary control of the budget. Fearing a diminishment of their control, Britain and France intervened militarily, bombarding Alexandria and crushing the Egyptian army at the battle of Tel el-Kebir.[21] They reinstalled Ismail's son Tewfik as figurehead of a de facto British protectorate.[22] In 1914 the Protectorate was made official, and the title of the head of state, which had changed from pasha to khedive in 1867, was changed to sultan, to repudiate the vestigal suzerainty of the Ottoman sultan, who was backing the Central powers in World War I. Abbas II was deposed as khedive and replaced by his uncle, Husayn Kamil, as sultan.[23]
In 1906, the Dinshaway Incident prompted many neutral Egyptians to join the nationalist movement. After the First World War, Saad Zaghlul and the Wafd Party led the Egyptian nationalist movement, gaining a majority at the local Legislative Assembly. When the British exiled Zaghlul and his associates to Malta on March 8, 1919, the country arose in its first modern revolution. Constant revolting by the Egyptian people throughout the country led Great Britain to issue a unilateral declaration of Egypt's independence on February 22, 1922.[24]

The Revolution
The new Egyptian government drafted and implemented a new constitution in 1923 based on a parliamentary representative system. Saad Zaghlul was popularly-elected as Prime Minister of Egypt in 1924. In 1936 the Anglo-Egyptian Treaty was concluded. Continued instability in the government due to remaining British control and increasing political involvement by the king led to the ouster of the monarchy and the dissolution of the parliament in a military coup d'état known as the 1952 Revolution. The officers, known as the Free Officers Movement, forced King Farouk to abdicate in support of his son Fuad.
On June 18, 1953, the Egyptian Republic was declared, with General Muhammad Naguib as the first President of the Republic. Naguib was forced to resign in 1954 by Gamal Abdel Nasser – the real architect of the 1952 movement – and was later put under house arrest. Nasser assumed power as President and declared the full independence of Egypt from the United Kingdom on June 18, 1956. His nationalization of the Suez Canal on July 26, 1956 prompted the 1956 Suez Crisis.

View of Cairo, the largest city in Africa and the Middle East. The Cairo Opera House (bottom-right) is the main performing arts venue in the Egyptian capital.
Three years after the 1967 Six Day War, during which Israel had invaded and occupied Sinai, Nasser died and was succeeded by Anwar Sadat. Sadat switched Egypt's Cold War allegiance from the Soviet Union to the United States, expelling Soviet advisors in 1972. He launched the Infitah economic reform policy, while violently clamping down on religious and secular opposition alike.
In 1973, Egypt, along with Syria, launched the October War, a surprise attack against the Israeli forces occupying the Sinai Peninsula and the Golan Heights. It was an attempt to liberate the territory Israel had captured 6 years earlier. Both the US and the USSR intervened and a cease-fire was reached. Despite not being a complete military success, most historians agree that the October War presented Sadat with a political victory that later allowed him to regain the Sinai in return with peace with Israel.
Sadat made a historic visit to Israel in 1977, which led to the 1979 peace treaty in exchange for the complete Israeli withdrawal from Sinai. Sadat's initiative sparked enormous controversy in the Arab world and led to Egypt's expulsion from the Arab League, but it was supported by the vast majority of Egyptians.[25] A fundamentalist military soldier assassinated Sadat in Cairo in 1981. He was succeeded by the incumbent Hosni Mubarak. In 2003, the Egyptian Movement for Change, popularly known as Kefaya, was launched to seek a return to democracy and greater civil liberties.

Main article: Geography of Egypt

White Desert, Farafra
At 1,001,450 square kilometers (386,660 sq mi),[8] Egypt is the world's 38th-largest country (after Mauritania). It is comparable in size to Tanzania, twice the size of France, four times the size of the United Kingdom, and is more than half the size of the US state of Alaska.
Nevertheless, due to the aridity of Egypt's climate, population centres are concentrated along the narrow Nile Valley and Delta, meaning that approximately 99% of the population uses only about 5.5% of the total land area.[9]

The Coastline of Alexandria, Egypt's second largest city
Egypt is bordered by Libya to the west, Sudan to the south, and by the Gaza Strip and Israel to the east. Egypt's important role in geopolitics stems from its strategic position: a transcontinental nation, it possesses a land bridge (the Isthmus of Suez) between Africa and Asia, which in turn is traversed by a navigable waterway (the Suez Canal) that connects the Mediterranean Sea with the Indian Ocean via the Red Sea.

The Nile River in Egypt
Apart from the Nile Valley, the majority of Egypt's landscape is a sandy desert. The winds blowing can create sand dunes more than 100 feet (30 m) high. Egypt includes parts of the Sahara Desert and of the Libyan Desert. These deserts were referred to as the "red land" in ancient Egypt, and they protected the Kingdom of the Pharaohs from western threats.
Towns and cities include Alexandria, one of the greatest ancient cities, Aswan, Asyut, Cairo, the modern Egyptian capital, El-Mahalla El-Kubra, Giza, the site of the Pyramid of Khufu, Hurghada, Luxor, Kom Ombo, Port Safaga, Port Said, Sharm el Sheikh, Suez, where the Suez Canal is located, Zagazig, and Al-Minya. Oases include Bahariya, el Dakhla, Farafra, el Kharga and Siwa. Protectorates include Ras Mohamed National Park, Zaranik Protectorate and Siwa. See Egyptian Protectorates for more information.

Satellite image of Egypt, generated from raster graphics data supplied by The Map Library

Climate
Egypt does not receive much rainfall except in the winter months.[10] South of Cairo, rainfall averages only around 2 to 5 mm (0.1 to 0.2 in) per year and at intervals of many years. On a very thin strip of the northern coast the rainfall can be as high as 410 mm (16 in),[11] with most of the rainfall between October and March. Snow falls on Sinai's mountains and some of the north coastal cities such as Damietta, Baltim, Sidi Barrany, etc. and rarely in Alexandria, frost is also known in mid-Sinai and mid-Egypt.
Temperatures average between 80 °F (27 °C) and 90 °F (32 °C) in summer, and up to 109 °F (43 °C) on the Red Sea coast. Temperatures average between 55 °F (13 °C) and 70 °F (21 °C) in winter. A steady wind from the northwest helps hold down the temperature near the Mediterranean coast. The Khamaseen is a wind that blows from the south in Egypt in spring, bringing sand and dust, and sometimes raises the temperature in the desert to more than 100 °F (38 °C).
Every year, a predictable flooding of the Nile replenishes Egypt's soil. This gives the country consistent harvest throughout the year. Many know this event as The Gift of the Nile.
The rise in sea levels due to global warming threatens Egypt's densely populated coastal strip and could have grave consequences for the country's economy, agriculture and industry. Combined with growing demographic pressures, a rise in sea levels could turn millions of Egyptians into environmental refugees by the end of the century, according to climate experts.[12]

One of the ancient Egyptian names of the country, Kemet (kṃt), (from kem "black"), is derived from the fertile black soils deposited by the Nile floods, distinct from the deshret, or "red land" (dšṛt), of the desert.[3] The name is realized as kīmi and kīmə in the Coptic stage of the Egyptian language, and appeared in early Greek as Χημία (Khēmía).[4] Another name was t3-mry "land of the riverbank".[5] The names of Upper and Lower Egypt were Ta-Sheme'aw (t3-šmˁw) "sedgeland" and Ta-Mehew (t3 mḥw) "northland", respectively.
Miṣr, the Arabic and modern official name of Egypt (Egyptian Arabic: Maṣr), is of Semitic origin, directly cognate with other Semitic words for Egypt such as the Hebrew מִצְרַיִם (Mitzráyim), literally meaning "the two straits" (a reference to the dynastic separation of upper and lower Egypt).[6] The word originally connoted "metropolis" or "civilization" and also means "country", or "frontier-land".
The English name "Egypt" came via the Latin word Aegyptus derived from the ancient Greek word Aígyptos (Αίγυπτος). The adjective aigýpti, aigýptios was borrowed into Coptic as gyptios, kyptios, and from there into Arabic as qubṭī, back formed into qubṭ, whence English Copt. The term is derived from Late Egyptian Hikuptah "Memphis", a corruption of the earlier Egyptian name Hat-ka-Ptah (ḥwt-k3-ptḥ), meaning "home of the ka (soul) of Ptah", the name of a temple to the god Ptah at Memphis.[7] Strabo provided a folk etymology according to which Aígyptos (Αίγυπτος ) had evolved as a compound from Aegaeon uptiōs (Aἰγαίου ὑπτίως), meaning "below the Aegean".

Egypt ([ˈiːdʒɪpt] (help·info); Arabic: مصر‎, Miṣr or Máṣr) is a country in North Africa, with the Sinai Peninsula forming a land bridge to Western Asia. Covering an area of about 1,010,000 square kilometers (390,000 sq mi), Egypt borders the Mediterranean Sea to the north, the Gaza Strip and Israel to the northeast, the Red Sea to the east, Sudan to the south and Libya to the west.
Egypt is one of the most populous countries in Africa and the Middle East. The great majority of its estimated 75.4 million[1] live near the banks of the Nile River, in an area of about 40,000 square kilometers (15,000 sq mi), where the only arable agricultural land is found. The large areas of the Sahara Desert are sparsely inhabited. About half of Egypt's residents live in urban areas, with the majority spread across the densely-populated centres of greater Cairo, Alexandria and other major cities in the Nile Delta.
Egypt is famous for its ancient civilization and some of the world's most famous monuments, including the Giza pyramid complex and its Great Sphinx. The southern city of Luxor contains numerous ancient artifacts, such as the Karnak Temple and the Valley of the Kings. Egypt is widely regarded as an important political and cultural nation of the Middle East.

It is very important that the individual wanting to trade foreign exchange be aware of the very marked difference between speculation and investment. Forex trading is by nature a speculative occupation. Foreign exchange markets are amongst the most volatile markets in the world. When traded on a margined basis they effectively become the most volatile in the world. Day trading in foreign exchange can be extremely profitable and high-risk profile traders can generate huge percentage returns even overnight. Day trading is however a mentally and psychologically challenging activity and is by no means meant for everyone. Day trading is essentially speculation and day traders essentially only do that: day trading. Most people who trade foreign exchange are not professional day traders however. Often the contractors of foreign exchange brokerage services are professionals in some capacity or other. These people do not day trade but take the occasional position from time to time. This is also speculation and should not be confused with making an investment. The conclusion here is that the nature of foreign exchange trading not lend itself as much to investment as it does to speculation and hedging (hedging may be performed in forward instruments). It is possible in a sense to make an investment in foreign exchange over a long-term period but this necessitates a large account value and low leveraging.

The breadth, depth, and liquidity of the market are truly impressive. It has been estimated that the world's most active exchange rates like EURUSD and USDJPY can change up to 18,000 times during a single day. Somewhere on the planet, financial centers are open for business, and banks and other institutions are trading the dollar and other currencies, every hour of the day and night, aside from possible minor gaps on weekends. In financial centers around the world, business hours overlap; as some centers close, others open and begin to trade. The foreign exchange market follows the sun around the earth. Each business day arrives first in the Asia-Pacific financial centers; first Wellington, New Zealand, then Sydney, Australia, followed by Tokyo, Hong Kong, and Singapore. A few hours later, while markets remain active in those Asian centers, trading begins in Bahrain and elsewhere in the Middle East. Later still, when it is late in the business day in Tokyo, markets in Europe open for business. Subsequently, when it is early afternoon in Europe, trading in New York and other U.S. centers starts. Finally, completing the circle, when it is middle or late afternoon in the United States, the next day has arrived in the Asia-Pacific area, the first markets there have opened, and the process begins again. The graph underneath displays not only the currency trading time cycle but also the average 'depth' of trading at different times during the day in the various business hours.1. Spot rate A spot transaction is a straightforward (or outright) exchange of one currency for another. The spot rate is the current market price or 'cash' rate. Spot transactions do not require immediate settlement, or payment 'on the spot'. By convention, the settlement date, or value date, is the second business day after the deal date on which the transaction is made by the two parties. 2. Bid & ask In the foreign exchange market (and essentially in all markets) there is a buying and selling price. It is important to perceive these prices as a reflection of market condition. A market maker is expected to quote simultaneously for his customers both a price at which he is willing to buy (the bid) and a price at which he is willing to sell (the ask) standard amounts of any currency for which he is making a market. ACM quotes very competitive spreads to customers, to site an example if a trader is interested in a transaction in EURUSD then he can trade on a bid/ask of say 0.9150 / 0.9153. This means that ACM is willing to buy from him a pre-determined amount at 0.9150 or inversely to sell to him at 0.9153. Generally speaking the difference between the bid and ask rates reflect the level of liquidity in a certain instrument. On a normal trading day, the major currency pairs EURUSD, USDJPY, USDCHF and GBPUSD are traded by a multitude of market participant every few seconds. High liquidity means that there is always a seller for your buy and a buyer for your sell at actual prices. 3. Base currency and counter currency Every foreign exchange transaction involves two currencies. It is important to keep straight which is the base currency and which is the counter currency. The counter currency is the numerator and the base currency is the denominator. When the counter currency increases, the base currency strengthens and becomes more expensive. When the counter currency decreases, the base currency weakens and becomes cheaper. In telephone trading communications, the base currency is always stated first. For example, a quotation for USDJPY means the US dollar is the base and the yen is the counter currency. In the case of GBPUSD (usually called 'cable') the British pound is the base and the US dollar is the counter currency. 4. Quotes in terms of base currency Traders always think in terms of how much it costs to buy or sell the base currency. When a quote of 0.9150 / 53 is given that means that a trader can buy EUR against USD at 0.9153. If he is buying EURUSD for 1'000'000 at that rate he would have USD 915'300 in exchange for his million Euro. Of course traders are not actually interested in exchanging large amounts of different currency, their main focus is to buy at a low rate and sell at higher one. 5. Basis points or 'pips' For most currencies, bid and offer quotes are carried down to the fourth decimal place. That represents one-hundredth of one percent, or 1/10,000th of the counter currency unit, usually called a 'pip'. However, for a few currency units that are relatively small in absolute value, such as the Japanese yen, quotes may be carried down to two decimal places and a 'pip' is 1/100th of the terms currency unit. In foreign exchange, a 'pip' is the smallest amount by which a price may fluctuate in that market. 6. Euro cross & cross rates Euro cross rates are currency pairs that involve the Euro currency versus another currency. Examples of Euro crosses are EURJPY, EURCHF and GBPEUR. Currency pairs that involve neither the Euro nor the US dollar are called cross rates. Examples of cross rates are GBPJPY and CHFJPY. Of course hundreds of cross rates exist involving exotic currency pairs but they are often plagued by low liquidity. Ever since the Euro the number of liquid cross rates have decreased and have been replaced (to a certain extent) by Euro crosses.

Foreign exchange is traded essentially in two distinctive ways. Over an organized exchange and 'over the counter'. Exchange traded foreign exchange represents a very small portion of the total foreign exchange market the great majority of foreign exchange deals being traded between banks and other market participants 'over the counter'. 1. Exchange traded currencies In the case of an organized exchange like the Chicago Mercantile exchange (CME) in the US, standardized currency contract sizes that represent a certain monetary value are traded in the International money market (IMM). A central clearing house organizes matching of transactions between counter-parties. There are various disadvantages to trading currency futures as outlined in the chapter Advantages of trading FX. 2. Forex market In comparison the over the counter market is traded around the world by a multitude of participants and price quality, reputation and trading conditions determine who a participant wishes to trade with. It is probably the most competitive market in the world and brokers like ACM must insure they live up to the highest standards of service and be compliant with market standards and practices if they want to acquire new customers and retain their existing ones. In 1998 a survey under the auspices of the Bank for International Settlements (BIS), global turnover of reporting dealers was estimated at about USD 1.49 trillion per day. In comparison, currency futures turnover was estimated at USD 12 billion. Among the various financial centers around the world, the largest amount of foreign exchange trading takes place in the United Kingdom, even though that nation's currency, the British pound is less widely traded in the market than several others. As shown in the graph underneath, the United Kingdom accounts for about 32 percent of the global total; the United States ranks a distant second with about 18 percent, and Japan is third with 8 percent.

In the last years, the foreign exchange market has expanded from one where banks would execute transactions between themselves to one in which many other kinds of financial institutions like brokers and market-makers participate including non-financial corporations, investment firms, pension funds and hedge funds. Its' focus has broadened from servicing importers and exporters to handling the vast amounts of overseas investment and other capital flows that currently take place. Lately foreign exchange day trading has become increasingly popular and various firms offer trading facilities to the small investor. Foreign exchange is an 'over the counter' (OTC) market, that means that there is no central exchange and clearing house where orders are matched. Geographic trading 'centers' exist around the world however and are: (in order of importance) London, New York, Tokyo, Singapore, Frankfurt, Geneva & Zurich, Paris and Hong Kong. Essentially foreign exchange deals are made between participants on the basis of trust and reputation to deliver on an agreement. In the case of banks trading with one another, they do so solely on that basis. In the retail market, customers demand a written legally accepted contract between themselves and their broker in exchange of a deposit of funds on which basis the customer may trade. Some market participants may be involved in the 'goods' market, conducting international transactions for the purchase or sale of merchandise. Some may be engaged in 'direct investment' in plant and equipment, or may be in the 'money market,' trading short-term debt instruments internationally. The various investors, hedgers, and speculators may be focused on any time period, from a few minutes to several years. But, whether official or private, and whether their motive be investing, hedging, speculating, arbitraging, paying for imports, or seeking to influence the rate, they are all part of the aggregate demand for and supply of the currencies involved, and they all play a role in determining the exchange rate at that moment.

In order to gain a complete understanding of what foreign exchange market is, it is useful to examine the reasons that lead to its existence in the first place. Exhaustively detailing the historical events that shaped the foreign exchange market into what it is today is of no great importance to the fx trader and therefore we happily will omit lengthy explanations of historical events such as the Bretton Woods accord in favor of a more specific insight into the reasoning behind foreign exchange as a medium of exchange of goods and services. Originally our ancestors conducted trading of goods against other goods this system of bartering was of course quite inefficient and required lengthy negotiation and searching to be able to strike a deal. Eventually forms of metal like bronze, silver and gold came to be used in standardized sizes and later grades (purity) to facilitate the exchange of merchandise. The basis for these mediums of exchange was acceptance by the general public and practical variables like durability and storage. Eventually during the late middle ages, a variety of paper IOU started gaining popularity as an exchange medium. The obvious advantage of carrying around 'precious' paper versus carrying around bags of precious metal was slowly recognized through the ages. Eventually stable governments adopted paper currency and backed the value of the paper with gold reserves. This came to be known as the gold standard. The Bretton Woods accord in July 1944 fixed the dollar to 35 USD per ounce and other currencies to the dollar. In 1971, president Nixon suspended the convertibility to gold and let the US dollar 'float' against other currencies.Since then the foreign exchange market has developed into the largest market in the world with a total daily turnover of about 1.5 trillion USD. Traditionally an institutional (inter-bank) market, the popularity of online currency trading offered to the private individual is democratising foreign exchange and widening the retail market.