The History Of Forex Trading
How Did We Start Trading Forex
Over the past several decades, the evolution of the foreign exchange (forex) market has been significant. From a gold standard where currencies moved slowly, to the era of fast-paced electronic trading, this market is one of the most-exciting available to retail traders.
Bretton Woods Conference
Held in 1944 to regulate the international monetary and financial system after the end of World War II, the conference was aiming to improve the deteriorating economic situation that engulfed the globe after the war.
Subsequently, the major economic powers agreed to fix the exchange rate of the US Dollar against Gold to an equivalent of $35 per ounce. Furthermore, the countries unanimously agreed to fix their exchange rate to the Dollar.
The Failure of the Bretton Woods System
The agreement, whose goals were to minimize obstacles standing in the way of international transactions, collapsed in 1971 due to the sharp drop in confidence in the US Dollar during the Vietnam War.
Subsequently, U.S. President Richard Nixon scrapped the fixed exchange rate of the dollar against gold and other currencies. Nixon also allowed central banks to step into the market if there was a need; especially in case of severe price fluctuations. From that moment on, the Forex market started evolving and grew in size and liquidity.
The Emergence of Retail Brokers
The radical technological developments during the era of the internet enabled the emergence of retail brokers. In the year 1999 the barriers of entry into the Foreign exchange market dropped for smaller investors. Several brokers rapidly emerged and took over a large portion of the retail FX market. Independent speculators could now trade foreign exchange on leverage as spreads dropped and electronic trading started taking over financial markets.