Forex Trading For Beginners – History Of Forex Market #2

Forex Trading For Beginners – History Of Forex Market

Here is a walk along memory lane on how the Forex Market transpired to the largest and liquid market of the world. It is inevitable that reading about archaic stuff is quite boring and non-palatable to our taste yet it would be a handful of learning to know about its beginning and background. It will be your foundation to your Forex Trading Strategies. Without further a do, I bring to you the brief history of the Forex Market.

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  • In 1876, the gold exchange standard was implemented, which in turn makes solid gold important in producing paper currencies. The goal was to stabilize world currencies by equating its value to the price of gold. Theoretically, it was a good idea but it created a boom-bust patterns which led to its demise eventually.
  • Beginning World War 2, the gold exchange standard was changed due to the reason that some European countries didn’t have enough gold reserves to support the production of paper currencies that they needed to allocate on military projects. Despite the gold exchange standard’s demise, it remained up until now, a form of monetary value.

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  • After World War II, economies across Europe were in deep coma. In order to help these economies jump back to life, the Bretton Woods Accord was convened in July 1944.
  • Because of Bretton Woods, several resolutions were made to peg foreign currencies to the U.S. dollar that arguably had the greatest immediate impact on the global economy. It resulted in the U.S. dollar to be the primary reserve currency, and the only currency to be backed by gold.
  • Several resolutions arose from Bretton Woods, but it was the “pegging” of foreign currencies to the U.S. dollar that arguably had the greatest immediate impact on the global economy.
  • In 1971, the U.S. declared that it will no longer exchange gold for U.S. dollars which ended the Bretton Woods. U.S. President Richard Nixon eliminated the gold standard for the U.S. dollar to combat rising gold prices contributing to high inflation levels. This action led directly to free-floating currency exchange rates and gave rise to the modern currency OTC market.

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  • The CME launched the International Monetary Market (IMM) in 1971.
  • With the end of the Bretton Woods System, the floating foreign exchange was born in 1976.
  • The Chicago Mercantile Exchange (CME) became the first exchange to offer currency trading.
  • Until the mid  1990s, that electronic trading was widely used by traders.
  • In recent years, new developments in web-related technologies have made it possible for a number of independent brokers to develop internet-based trading platforms. These brokers serve as market-makers and provide a two-way quote for each currency pair they support.

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As we move on to the next chapter, we will further learn more about the basics of Forex trading strategies, its common used terms and other important things to equip you to be a well-informed trader. Also, there are plenty of Free Forex Trading Strategies and Free Forex Tips that are widely available all over the internet. All you have to do is be wise in being selective with the resources available.

Source:

  • What is Forex Trading? – A Definition & Introduction by Nial Fuller. Retrieved April 08, 2013. http://www.learntotradethemarket.com/forex-university/introduction-what-is-forex-trading
  • Introduction to the Currency Market. Retrieved April 08, 2013. http://fxtrade.oanda.com/learn/intro-to-currency-trading/currency-market/?srccont=breadcrumb

FOREX TRADING FOR BEGINNERS – CHAPTERS:

  1. Introduction to Forex Market
  2. History of Forex Market
  3. Common Used Forex Terms

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