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Forex History

The Foreign Exchange market ("FX or Forex") as we know it today, originated in 1973. However, money has been around in one form or the other since ancient times. During the middle ages, the need for another form of currency other than coins emerged. Paper notes or bills became the method of choice representing transferable third party payment of funds. This made foreign exchange much easier for merchants and traders and contributed to the growth of regional economies. From the Middle Ages all the way through WWI, the Forex markets were relatively stable and without much speculative activity. After WWI the Forex Markets became volatile and speculative activity increased ten fold. The Great Depression and the removal of the gold standard in 1931 created a lull in Forex activity. From 1931 until 1973, the Forex market went through a series of changes. These changes greatly impacted the global economies of the time.

The first major change occurred towards the end of WWII and was known as the Bretton Woods Accord. This system, which tied the US dollar to the price of gold and all currencies to the US dollar, was created at, and named after, an international conference held at the Mount Washington Hotel, in the resort town of Bretton Woods, New Hampshire, in 1944. By most estimates the foreign exchange market grew by some 1,200% between 1974 and 1995, following the demise of the Bretton Woods Exchange Rate System. Thirty years of uninterrupted growth in the foreign exchange market is likely to continue, as more countries and companies deal internationally and capital flows increase.

Over the last three decades the foreign exchange market or FOREX has become the world's largest financial market, with $2-3 trillion USD traded daily. The primary market for currencies is the 24-hour Interbank market. The Interbank market is open around the clock, moving from major banking centers of the United States to Australia and New Zealand to the Far East, to Europe and finally back to the United States. Until recently the Forex market has not been available for the small speculator. With the large minimum transaction sizes and often-stringent financial requirements, banks, hedge funds, major currency dealers and the occasional high net-worth individual speculator were the principal participants. These large traders were able to take advantage of the many benefits offered by the foreign exchange market when compared to other markets including fantastic liquidity and the strong trending nature of the world's primary currency exchange rates.