The History Of Forex Trading

Traders all around the world participate in Forex trading as a matter of course. Yet how many of them know the long and varied history of the practice? Here we take a look at the history of Forex trading in order to determine how precisely it came into being. If you are interested in the history of Forex trading then read on to find out more.

The history of Forex trading began thousands of years ago when ancient peoples marketed their wares to other tribes. In doing so they would often exchange one form of prehistoric currency for another. This was the beginning of the practice of trading and thus where the history of Forex trading started from.

The history of Forex trading continues. In the era of the Bible, money-chagers were a common sight on the streets of market cities where traders of wares from across the known world operated. Both goldsmiths and silversmiths operated crude methods of money exchange. By the 4th century AD, the practice of Forex was monopolised for what is thought to have been the first time by the government of the Byzantine empire. These are key facts to note if you are interested in the history of Forex trading.

The middle ages saw merchants travelling frequently between many countries with their wares, dealing with customers in a host of languages. As exchange systems developed primitive paper currency in the forms of ‘IOUs’ began to be used in order to help merchants purchase items in different countries. This was a crucial landmark in the history of Forex trading.

Those familiar with the history of Forex trading may know that a powerful family, the Medicis, opened foreign banks in order to help textile merchants exchange different currencies. By the 17th century, Amsterdam, now a busy merchant hub, had a version of a Forex market in place. By 1880, the introduction of the gold standard meant that a standardised unit of gold could be used to facilitate foreign exchange. Forex went through a veritable boom period in the years before the Great War. As we have seen, the history of Forex trading truly has stretched back through the ages.

In the late 19th and early 20th century, the history of Forex trading shows us the dangers of relying too heavily on paper currency. Banks tended to support their currencies with the gold standard, hence paper notes could be exchanged for gold. However, this did not often happen. The increased amount of paper currency which did not have gold to actually cover its value meant that inflation occurred in many countries across Europe. In turn, inflation led to political instability. Hence, in 1931 the gold standard became defunct, a key turning point in the history of Forex trading.

After some years of tumultuous trading, heightened by the Second World War, the Bretton Woods Accord was signed, thus enabling the fluctuation of currencies within 1%. The Bretton Woods Accord was what would enable in time a free-floating Forex system. Post-1973, countries decided to trade Forex using currency reserves for security. Reuters was the company who at this time introduced basic computer systems in order to place a Forex trade.

The next two decades saw the Forex market gradually develop into the system it is today, a free market without government interference. Thus the history of Forex trading is a story which ranges from prehistoric trades, to government controlled merchant banks, to free trading for all on an open market. Really, the history of Forex trading is rather uplifting.

Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment. 

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