History of Forex

14 Nov 2022 By: Kopito Academy

Introduction to the history of Forex

 

History of the forex market

 

Forex trading, the act of exchanging fiat currencies, is believed to be several hundred years old, dating back to the Babylonian period. Today, the Forex market is one of the world's largest, most liquid, and accessible markets.

Understanding the forex history and critical historical events is vital for forex traders because similar cases may occur in different forms in the future. You know this saying "history always repeats itself."

 

History of forex in the world

History of Forex in the world

Following World War II, the entire world was in upheaval, which caused the major western nations to see the necessity of establishing a safe and stable economic system. This arrangement is known as the Bretton Woods System. This system assessed the dollar's value (credit) against gold and made the other currencies dependent on the dollar.

This system caused economic stability for a while, but as soon as the world's major economies began to evolve and progress, the rules of this system became obsolete. This process continued until 1971 when the Bretton Woods agreement was voided and replaced by another currency evaluation system.

The currency market became a free-floating state as rate changes became dependent on market supply and demand. In the beginning, determining the rate was a difficult task, but the advancement of technology and communication made it easy.

 

The history of forex with the development of the Internet

 

After the end of the 90s, trading in forex started in most countries. Although many years before this date, professional capital market activists were also active, as a result, the buying and selling (supply and demand) of currencies through this market gradually increased. Every year, many people invest in this market and profit by using specialized training in forex.

By reviewing forex history, we know about the trading process from the beginning to the present day. The first trades in the world were in the form of bartering, later in the form of coin exchanges, and now in its current state, currency exchanges. Although the forex market was officially established in 1973 with floating exchange rates, a currency exchange has a history dating back to the 15th century.

Finally, in 1990, following the advent of computers and the rapid growth of the Internet, banks began to build their trading platforms based on this system. These platforms were used to show the live price to the customers so they could enter into the trading themselves. In the meantime, some people built a platform based on the Internet for ordinary people to earn a profit.

These businesses are called retail forex brokers, allowing people to trade in forex with smaller trading volumes. Unlike the interbank system, where the standard transaction size is 1 million units, small brokers allowed people to trade up to 1000 units in forex.

A brief history of Forex

Forex is an international market that does not have a specific market location, and currency transactions in this market are done through an interconnected network called OTC, but what does OTC actually stand for? OTC is the abbreviation of over-the-counter. In simpler words, it means that all transactions in the forex market are done through computer networks among traders all over the world.

Holistically the forex market is growing in modern society, so it is now known as the largest financial market in the world.