The History of Forex
A trader doesn’t need to know the history of the market he or she is trading on in order to earn money.
However, it’s always helpful to know about the background of something before moving deeper into learning about it.
It helps raise confidence and comprehensive knowledge for the people interested in becoming great forex traders.
Foreign exchange currencies can be dated back to ancient times when merchants of different sorts traded coins from country to country.
Coins were first used in ancient Egypt, and later on, the Babylonians began to use paper notes.
With the advent of banks, foreign exchange became something maintained by international banks. This became popular in the middle ages
and enabled the growth of
European powers, allowing them to spread foreign currencies through Europe and the Middle East. The forex market is arguably the oldest
of all trading markets.
The gold standard was eventually used as the fixed value by which all trading commodities were held against.
This means that a particular weight in gold was established and used to trade for other currencies.
It began in Britain in the year 1816, where the British pound was defined as 123.27 grains of gold. The US adopted the gold
standard in 1879 and replaced the British pound as the top currency when the European nations quite using gold as the standard during World War I.
The US dollar eventually came to be the new standard of the financial market, becoming the new global reserve currency.
Other currencies were now set according to the US dollar. This was due to the financial downfalls across Europe because of the second World War.
By 1972, many European countries began to attempt to move away from dependency on the US dollar.
There were agreements made between countries to ensure currencies’ extended flexibility, but many attempts at this failed.
In 1978, the free-floating system was mandated by the International Monetary Fund (IMF), meaning that currencies were valued by how well
they were doing in the forex market: this meant that supply and demand of the currency dictated how valuable the currency was. In 1993, the
European Monetary System failed, and a worldwide free-floating system was put into place.
With the advent of online currency trading in 1994, forex trading began to expand. Since the first online forex transaction, the market has
grown into what it is today: a market on which more than $3.9 trillion are traded every day.
When everyone was given access to the market, it exploded into the world’s biggest trading market. With individuals given the ability to
participate and invest, the amount of trading increased to what it is today. The market was further strengthened on January 1st, 2002, when
the Euro was introduced as the official currency between 12 European nations.
It is now the second-largest currency traded on the forex markets. From there, it was no looking back, and from 2007 to 2010 the market
reached its staggering size, cementing it as the largest and most profitable market in the world.