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The History of Forex Trading


Forex Trading History

Trading, as we use the term today, has been in practice since the era of Babylonians. Yes, it’s true! Although at that time, it was referred to with a different name altogether… The Barter system!
That’s right. During earlier times, goods were exchanged in return for goods. And slowly, people started to exchange goods in return for foreign currencies of that time to make their trade a lot easier. This resulted in the increasing need of every trader to own a foreign currency as per the demands of his trade.

History of Currency or Forex trading can be traced back to the Middle Age times. It is believed that an international investment banker developed the method of using checks and bills to trade. However, starting from the middle ages, a lot has changed and evolved, creating the biggest currency trading market in the world today.
But the major changes which really shaped the trading scenario for the global currency market to make it look as we see today were the ones which occurred during the twentieth century.

By the late1930s, London was being considered as the world's foremost foreign exchange center. One of the main reasons behind this was that during that time, the British pound was regarded as the world's standard trading exchange. Also, the British pound had started to play a role of the main “Reserve” currency being held by many countries back then.

But the scenario took a dramatic turn after the Second World War, when the British economy was almost smashed resulting in the rise of the United States dollar. The USD then started to climb the path to success as it rose to become the world's major trading as well as reserve currency.
In July 1944, the Bretton Woods agreement was attained on the application of USA. The convention which was being held in Bretton Woods, New Hampshire for this accord discarded John Maynard Keynes pitch for a new world reserve trade backing an arrangement built on the US Dollar.
As a result to the Bretton Woods contract, a system of fixed exchange rates was decided, which resulted in partially re-establishing the Gold Standard and fixing the USD price at $35.00 per 1 ounce of Gold.
While the USD was priced against Gold, the other major currencies were set up against the USD itself.
The Second World War and the series of events which followed are mainly believed to have played an instrumental role in shaping today's Forex market situation.

Early 1980’s saw London becoming the key center of the Euro-dollar market, and till today, London efficiently remains the major offshore market.
Along with the USD and Euro, a number of other currencies including the Japanese Yen are also counted amongst the world’s major reserve currencies.

From back in the year 1978, when Forex trading displayed revenue of about 5 billion US dollars on per day basis, till date, the per day Forex trading turnover has now crossed the figure of a whooping 1.5 trillion US dollars.





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