Historical Background of Forex Trading

Historical Background of Forex Trading

 Foreign exchange is a global marketplace where we can exchange national and international currencies. Forex is the largest trading market with high liquidity and volatility. Forex plays a vital role in the economy of every country. In forex, traders invest in different currencies and then make trades.

The history of forex is very old, and it may be some thousand years old. Two thousand five hundred years ago, Egyptians and Greeks traded goods and currencies in Gold and Silver. They were traded as Gold and Silver, and their values were determined by their weight and size. 

Where forex began

The barter system started over 6000 BC, the oldest currency exchange method. Mesopotamia tribes introduced it. They exchange goods with other goods. Like they exchange salt with wheat, etc. They exchange the ship of goods with other ships. But in the 6th century BC, when Gold coins were produced and acted as currency, it was not acceptable in most countries because of Limited supply and durability

But in the beginning, gold was not too acceptable because it was critical to producing gold. It was legal by the Government, and if the Government had to pay any amount to another country, it would pay in the form of gold. But it was suspended when World War 1 started; European countries demanded to print money instead of producing gold and demanded more money.  

After World War 1, European countries started producing money, forming many rules and systems to exchange money. Following are some systems that are directly influencing Forex trading.

See also  Can You Drive in the US with Your License?

The Brett Wood system

After World War 2, Great Britain and France met at United Nations Monetary and Financial Conference in Bretton Woods, forming a new financial and economic order. They were trying to establish a system that helped the countries to be stable and reserve their resources

They have to fix their currency rate according to US Dollars, and the US will fix their currency to gold. Because then, the US had the most reserve in the world. But the US failed to return the US dollars because the amount of gold was insufficient to pay US dollars in circulation. Therefore president Richard Nickson ended the Brett Wood System in 1971.

Free-Floating System

In December 1971, Smithsonian Agreement came and was similar to Brett Wood System but allowed a greater amount of Fluctuation of currencies. In 1972, European countries tried to eliminate their dependency on US dollars. Then the Netherland, France, Belgium, Germany, and Italy established their European Joint Float. But this float was broken soon because they also made mistakes of American float, and in 1973 floating system was officially switched.

In the 1980s, major currencies had increased their values because the value of US dollars increased. But it was difficult for the investors and importers, and the GDP decreased to 3.25%. In the same Paul Vacker increase, the ratio of increase made the US the stronger economy globally.

Establishment of Euro

In 1990, the currency rates and speed increased more than ever. Now for forex, everything was changed, and you can trade the currencies affected by the political disturbance. Now emerging markets like Southeast Asia attracted currencies.

See also  How Do I Get My Returns in Mutual Funds?

Forex market today and in the Future

Nowadays, Forex is the largest market in the world, and it trades more than $5 trillion daily. Forex is a future for everyone, and for traders, it is shrouded by opportunities in the future. The forex market involves to stable the economy of a country. 

Forex Market is very attractive and beneficial for traders because of its leverage, liquidity, and open 24 hours. Digital currency like Bitcoin has a bright future ahead because to stabilize the economy Government also takes an interest in these currencies.  Some major participants in the forex are the followings.

Commercial companies

A huge and important part of forex money comes from foreign companies those trade in international currencies. These companies get small amounts of commission as compared to the banks.

Central Banks  

National central banks play an important role in the forex. They always try to control money inflation, political crisis, and interest rates. They also use their reserved money to stabilize the market value and economy of the country

Retails Foreign exchange traders

Retail brokers are the main participants in foreign exchange. They control the whole market and exchange their money for foreign exchange in the US open market. These brokers controlled the market with the help of local brokers and banks. 

There are two types of brokers in the FX market. One is a broker, and another is a dealer or market maker. Brokers are the agent of customers, and they work on behalf of customers. They tried to find the price that the customer told them to find. Market makers are the principal of setting a price for the customer.

See also  Go to URL to Get the Latest Info on Coronavirus

FAQs (Frequently Asked Questions)

Is today’s trading more beneficial than the oldest?

Yes, of course, today’s trading is more volatile than the oldest. The values of currency pairs increasing day by day. The oldest trading was not secure and was too much beneficial. Now forex and cryptocurrencies make the trading world a golden world.

Are there any apps for forex?

Yes, there are many apps for forex trading on the google play store and Apple store. Each app has its unique features and you can use any app that suits your need and strategy.

Are there any tools for signals in forex trading?

Yes, there are more than 20000 tools and instruments that work for traders and brokers. They give the signals if the price of any pair increases or decreases. Also, you can set limits if your trade fall under your limits your trade will automatically stop and you save your loss. Click on it to get trade245 registration

Conclusion

This was the history of Forex trading and now you will realize which era of forex is best and most beneficial. There is a lot of difference between today and the oldest forex. It will also change in the future and forex has a bright future.     

Scroll to Top