History of Forex Trading
In the history of forex trading until the end of the 90s, only the jetset or the rich, large financial institutions such as the central bank, private and government banks, and large commercial companies such as Apple or Toyota were doing this business. They can trade forex for trading purposes, paying debts, hedging (hedging), or investing. The capital required is large, and not just anyone can do forex business.
After the development of the internet all over the world in the late 90's, the forex market was finally able to be followed by almost all individuals, from businessmen to housewives, young and old alike. Brokers also began designing forex so that it could be traded individually by individuals. So now, from money changers, banks, to taxi drivers who hang out in front of your house alley, anyone can jump into the Forex market.
Isn't that amazing? Read the full history of forex trading below.
End of Barter Period and Commencement of Money Exchange
In the history of human civilization, it is known that the exchange of goods between individuals began with a barter system.In the history of human civilization, it is known that the exchange of goods between individuals began with a barter system. Suppose a person in need of a goat meets another person who sells two baskets of apples, and then agrees to exchange them, then a transaction can occur.However, over time, bartering alone was not enough to make ends meet. The main problem with the bartering system is what if you can't find the people whose needs and supplies to be exchanged exactly match? Suppose a person in need of a goat meets another person who sells two baskets of apples, and then agrees to exchange them, then a transaction can occur. However, over time, bartering alone was not enough to make ends meet. The main problem with the bartering system is what if you can't find the people whose needs and supplies to be exchanged exactly match?
In order to overcome the shortage of bartering, a means of payment or means of exchange was created in various forms. In this period, mankind used shells, beads, rare stones, and precious metals as mediums. However, it should be noted that each region can apply its own "currency" based on what is considered the most valuable, recognized by society, and is portable (easy to carry anywhere).
Because each region of the world uses a different "currency", traders who carry out transactions between regions or shipping across islands and continents often need a currency exchange reference that is universally accepted. In many locations, it is agreed to use precious metals such as Silver or Gold as the medium.
The kingdoms that stood at that time began to print "money" each by determining the content of certain precious metals in it. In turn, the exchange is based on these levels. This was the beginning of currency exchange in ancient times.
Since when did currency exchanges take place?
Byzantine records (circa 4th century BC) show that the monarchs monopolized the exchange of money.Then the Papyrus notes also show that currency exchanges were carried out 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.
History of Modern Forex Trading
Exchange of money has been going on since ancient times, but the history of modern forex trading as it is now actually only started 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 that the governments of the Allied countries felt they needed a system that would later be able to unite the global economy. Then formed the "Bretton Woods System" to make this dream come true.
In the Bretton Woods System that was born in the city of Bretton Woods, New Hampshire, United States in 1944, for the first time there are official rules to regulate monetary relations between countries. The United States, which at that time held two-thirds of the world's gold reserves, insisted that the system rely on gold and the US dollar. Finally, this system requires all countries involved to associate the value of their currency with gold and the US Dollar. However, it did not last long.
On August 15, 1971, the United States unilaterally cut off its currency relationship with gold, thereby automatically ending the Bretton Woods system. The dollar value is no longer obtained from the gold reserves owned, but only from the promise of the US government. This action actually makes the US Dollar a reserve currency for many countries in the World. At that instant, the exchange rates between currencies were no longer determined by default, but by following a simple economic system: demand and supply. Born a new phase in the history of forex trading, namely the period of floating exchange rates (floating exchange rate system).
After that, the main currency buying and selling transactions are carried out by banks; while others such as government and companies need to contact banks as intermediaries. Companies that need can contact the bank via telephone, then the bank records at what price a currency is bought or sold. From this created the interbank market as an over-the-counter network in which currencies are exchanged and currency exchange rates change dynamically. (also read: 7 psychology a trader should have)
The Era of Online Forex Trading
The development of the global economy between the 80s and 90s then ushered the world in a new development in the history of forex trading where people could participate in pursuing a world that was previously dominated by large banks and international scale companies. Transactions through banking intermediaries no longer have to be preceded by telephone contact, but simply with instructions via the internet. In fact, a trading platform was created that allows anyone to view "prices" (currency exchange rates) and trade currencies in real-time.
Technological development is a crucial point in the history of forex trading, because it boosted trading volume in the forex market so that it shot up to become the largest financial market in the world with daily liquidity reaching USD 5.3 trillion in 2013. At this time too, we can find out which currencies are available. widely traded and seek to benefit from a strengthening or weakening of the currency exchange rate.
How can we as "ordinary people" benefit from currency exchange? Now there are many "forex brokers" that serve currency trading for the public on a small scale. Unlike the interbank market which has standard trade sizes (100,000 US Dollars per unit); Forex brokers like this facilitate the public to trade forex even with capital as small as a few tens or hundreds of dollars. Even more sophisticated in today's mobile era, forex trading can be done via a laptop, tablet, android, or iPhone. As long as there is an electricity and internet connection, we can "dive into the forex market" and benefit from it, as long as we know how to trade forex.
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