A Brief History of Forex

Filed under: Learn Forex Trading |

Since we have been taking a look at the ins and outs of forex trading in the past few weeks, I thought it was about time to give a historical overview of forex and where it came from.

 

To begin with, the Babylonians were the first people who used notes and receipts, but foreign currency trading really began in the Middle East when people who used different currencies traded with each other. However, they still didn’t use money as we know it today. That came in the middle ages when people decided they needed a more convenient way of making payments.

 

Later, before 1875, gold and silver were mainly used for international payments. But after new deposits were found, the value of gold and silver declined and the balance of supply and demand changed. This was vital in the history of forex trading. In the late nineteenth century, every country decided that their currency could be exchanged for a specific amount of gold, and over time, the differences in the price of gold between two currencies became the exchange rate between those two currencies.

 

The foreign currency market really got going in the 1930s, when London became the center of world trade and the GBP became the basic currency. However, after World War II, the British economy collapsed and the US dollar became the leading playing in the world currency market.

 

Today, the USD is still the most traded currency. The market now is one of supply and demand – so when everyone wants one particular currency, the price goes up, and when it is less popular, the price goes down. This is the forex market as we know it today. It is very much a free floating market, but it is occasionally influenced by big banks. But the good thing is, that virtually anybody can participate – all you need is a computer, an internet connection, and some money to trade with. And the rest, as they say, is up to you!

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