Thursday, December 27, 2012

The History Of Forex Trading

US gold certificate (1922)
US gold certificate (1922) (Photo credit: Wikipedia)
Forex trading is a business concept that commenced centuries ago when business men used to trade in coins. To understand the Forex history, it is important to look into three of its watershed moments, here being; the gold standard, the Bretton woods agreement and the floating foreign exchange rates.

During the gold standard system, gold was used as a fixed standard to measure the value of commodities. This is because the development of the currency system was backed by gold. Ideally, as long as there was enough gold reserve to back the amount of currency in the market, the gold standard system worked just fine.

The Bretton woods agreement came into force to replace the gold standard system, while the floating exchange rates abolished the gold system and was adopted by the world community in 1976. The forex history cannot be complete without mentioning the development of the forms of trading currently involved in forex trading.

Essentially, forex trading involves the exchange of foreign currencies or denominations, where the value of currencies is independent of other foreign currencies. Some of the forms of forex trading that are though to be extremely risky include, index futures, trading in futures and options trading. They are considered risky because they involve trading in the value of currencies that cannot be ascertained.

Over the years, there has been a tremendous change in the forex market that has changed the forex history. This has enabled the forex market to have a centralized system thereby connecting centers into an integrated international market that any individual from any location in the world can trade in.

1 comment:

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