Let’s Find Out Forex Trading And Its History

Let's Find Out Forex Trading And Its History

In the history of forex trading until the end of the 90s, who did this business was only the jetset or wealthy people, large financial institutions such as central banks, private and government banks, as well as large commercial companies such as Apple or Toyota.

They can trade forex for trading purposes, pay debts, hedging (hedging), or investment. The capital needed is large, and not just anyone can do forex business.

After the development of the internet around the world in the late 90s, the forex market can finally be followed by almost any individual, from entrepreneurs to housewives, young and old.

Brokers also began to design forex so that it could be traded in retail by individuals. So now, starting from money changers, banks, to motorcycle taxi drivers who stand in front of the alley of your house…everyone can jump in the Forex market.

The End Of Barter And The Beginning Of Money Exchange

In the history of human civilization, it is known that the exchange of goods between individuals began with the barter system.

Suppose someone needs a goat to meet another person who sells two baskets of apples, and then agrees to exchange them, then the transaction can occur.

However, with the passage of time, barter alone was not enough to make ends meet. The problem especially of the barter system is what if nobody can find the person whose needs and supplies of goods to be exchanged exactly match!?.

In order to overcome the shortage of barter, then created a means of payment or means of exchange in various forms. In this period, mankind used shells, beads, rare rocks and precious metals as a medium.

However, please note that each region can apply its own “currency” based on what is considered the most valuable, recognized by the community, and is portable (easy to carry everywhere).

In many locations, the use of precious metals such as silver or gold as a medium is agreed upon. The kingdoms that stood in those days began to print each other “money” by specifying a certain grade of precious metals in them.

In turn, the exchange is based on such rates. This was the beginning of currency exchange in ancient times. Since when is currency exchange done? Byzantine records (circa 4th century BC) show that the royal side monopolized the exchange of money.

Later Papyrus records also show the exchange of currency in the era of ancient Egypt. Other regions ranging from Australia, Indonesia, China, India, to Europe have their own records. So, this is not something that suddenly appears in modern times.

The history of Modern Forex Trading money exchange has been going on since the days of baheula, but the history of modern forex trading as it is now actually just pioneered after World War II.

Here’s the story. There was a lot of chaos and economic crisis at the end of World War II, so the governments of the Allied countries felt the need for a system that would later be able to unite the global economy. Then the “Bretton Woods system” was formed to realize this dream.

In the Bretton Woods system, which was born in the city of Bretton Woods, State of New Hampshire, United States in 1944, for the first time there were Official Rules for regulating monetary relations between countries.

The United States, which at the time held two-thirds of the world’s gold reserves, insisted that the system be based on gold and the U.S. dollar. Finally, this system requires all countries involved to link the value of their currencies to gold and the US Dollar.

However, it did not last long. On August 15, 1971, the United States unilaterally severed its currency relationship with gold, thus automatically ending the Bretton Woods system.

The value of the dollar was no longer obtained from gold reserves owned, but only from the promise of the US government alone. This action instead made the US dollar a reserve currency for many countries in the world.

At that time, the exchange rate between currencies was no longer determined by default, but by following a simple economic system: demand (demand) and supply (supply).

There was born a new phase in the history of forex trading, namely the period of floating exchange rates (floating exchange rate system).

After that, currency buying and selling transactions are mainly carried out by banks; while other parties such as governments and companies need to contact banks as intermediaries.

Companies in need can contact the bank via telephone, then the bank records at what price a currency is bought or sold.

From this, the interbank market was created as an over-the-counter network where currencies are exchanged and currency exchange rates change dynamically.

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