History of Forex trading?
Forex is known as the foreign exchange transaction or trading. It can also be described simply as foreign exchange. Historians had it that this form of trade started with the Babylonians. It means exchanging one form of currency to another form of currency. This also started as a form of barter trade where one exchange goods for another. However, a problem arose when it became extremely difficult for such an exchange to be based on the real values of items. The introduction of gold as a medium of exchange tends to narrow down the problem because items can now be exchanged on the real value of gold. In international trade, the gold value was used as the basis of foreign exchange. This was removed in the year 1931, and this allowed the emergence of FOREX.
The introduction was helpful to the market and the global economy because it brings about reliability and stableness in international transactions. Because of the role played by the US in stabilizing the world economy and bringing about a stable global financial system, the denomination of the foreign exchange was done in US Dollars, and that was around the year 1944. This was the time the Second World War was ending where Americans led the western frank of the war.
It can be said that the formation of global financial institutions such as the World Bank , IMF, and GATT created the fertile ground for the formation of that foreign exchange currency. The agreement in the denomination of that foreign currency is that the value for Gold would be put at $35, and this would serve as the standard value for one ounce of gold. This also made it possible for the other currencies to have a constant standard. It thus stabilized and standardized the global financial system. This is good because it makes it easier to avoid any form of the financial crisis that would have arisen if such standardization was not done.
Foreign exchange also has to do with currency trading. Currency trading did not even state today. Any form of exchange in those days was considered a form of trading. It can be said that currency trading is as old as man. People were doing different forms of transactions and exchange, and one form of commission or the other was paid, and this has existed since history. It can, therefore, be said that forex trading did not start today.
Currency trading has also evolved over the centuries. The first documented information about the currency and trading currency started about the year 2500 years ago, and that was the time the Egyptians and the Greeks traded currencies and goods using silver and gold coins. The value at that time was based on the size and the weight of the gold and coins. This continued until 2000 years ago when the Roman empire decides to mint the currency, which was centralized in Rome. The government monopoly on currency trading was done, and it was based in Rome. The current state of that market represents what exists today where central banks can decide and rule on monetary policies.
The process continued until one thousand years, and that was precisely in the Middle Ages, and at that time, copper was accepted at the best material for coin minting and currency trading. It became easier to create coins with copper, which is easier and more affordable than gold. Thus it became possible to have coins that have different values. Those made of gold has higher value while that made with copper has a lower value. The first global forex trade was made about 500 years ago, and that took place in Amsterdam. The forex trade, as it is done today, started from Amsterdam forex trades, and it is the same principle that applies to the world today. Forex trade was able to thrive then because of the introduction of the Gold Standard, which was done in the year 1875. This made it possible for countries to mint as much of their national currencies as they like and in reserve was gold. This, therefore, ensured that the value of a currency is always guaranteed. However, the end of the first world war made it possible for countries to print more monies to finance their projects. By 1913 many companies have started to trade foreign currencies.