Money is a generally accepted medium of exchange to buy and sell goods and services. It commonly takes the form of a currency issued by the central bank of a country.

    When money is in the form of a currency, its physical form is banknotes and coins — this is called “fiat money” as it is usually the legal tender of a country, and must, therefore, be accepted as a means for payment.

    Money can also exist on paper in the form of a bank draft or cheque (a simply written promise to pay the bearer at some future date). Gold, silver or other precious commodities may also be used as money. Indeed, money itself is a commodity that can be traded.

    Money is also used as a unit of measurement so that goods and services can be priced to facilitate trade, the intrinsic value of different items can be compared and accounts can be kept.

    Money in trading

    Money is the main medium used in trading. Money in one currency can be traded for money in another country — this is called foreign exchange, or forex. It is one of the most widely traded of all securities because it is also the most liquid), with trading taking place globally on a 24-hour basis.

    Other financial instruments are also traded using the money, even if the buyer is trading on margin or leverage, i.e. using more money than they actually have to make the transaction.

    What is money management?

    Money management refers to one of the most important concepts in trading. It is a concept that protects your trading capital from losing trades and it is the most important skill for trading.

    “Never risk more than 1% of your trading capital in a single trade” is a rule of thumb that, as simple as it is, can already help a new trader to significantly reduce his or her risk.

    To read more about money management, please continue here:

    What is money supply?

    Money supply underpins the economy of a country as it represents the total amount of money in circulation there in the form of currency and bank deposits, which is usually a greater amount. A central bank can increase the money supply by producing more currency and releasing it into circulation, or decrease it by withdrawing a proportion of the currency in circulation.

    Thus, money supply and the monetary policy of central banks influences the exchange rates of currencies.