Whilst many of us may think that Forex currency trading is something very modern, the reality is different. In fact, it goes back a long way. The reason for this misconception is that many people get lost in the advanced jargon of the financial world, and lose sight of what, at its core, is a simple concept. At its most basic, Forex trading revolves around exchanging different currencies. This is something which archaeological evidence has helped prove dates back as far as ancient Egypt, Babylon and various other classical civilisations.
The team here at Impress Solutions, providers of foreign exchange software, have compiled this introductory history to Forex so that we may use the past to inform the present, and shape the future of the Forex market in years to come.
Forex As We Know It
Pre-20th Century
There were continuous developments in currency exchange from those antiquated times. As far back as medieval Europe, we can see examples of banks and banking networks being set up, monopolised by famous families such as the Medici in Italy. Later, in the 18th and 19th centuries dedicated currency traders began to crop up. However, in these times there was little standardisation, if any. Until such standardisation was to occur, like with so much else, the scope of growth for Forex currency trading would be severely limited. England and America both joined the gold standard during the earlier part of the 19th century, but again, without other nations joining its potential was restricted.
In 1870, all of that began to change. A greater number of countries started adopting the gold standard themselves. Continental heavy-hitters like France and Germany, for example, as well as aspirational nations like Japan. It was here that the Forex market truly began to take shape into something more akin to what we have in 2020.
Early 20th Century
The gold standard’s feasibility came under increasing scrutiny following WW2 and it wasn’t long until it was dropped in favour of the now famous Bretton Woods agreement. Which saw the $US being marked as the new standard for currencies to be marked against. This too, however, brought with it its own set of issues. Currencies were tied against the $US, but that in turn was still tied to gold. Many of the same issues that had plagued the downfall of the gold standard, therefore, continued to creep in even after the introduction of the Bretton Woods agreement.
Late 20th Century
After the Bretton Woods agreement, came the free-floating system in 1971, the introduction of the Euro and internet trading, all of which had huge impacts on the Forex market. These changes looked to continue to optimise and fine tune the market to better strengthen it. These changes, that this fluctuating system that free-floating allowed for, brought with it the chance for profit, hence why we see how attractive and often lucrative a market it is to trade upon. The market would not be what it is today without over a century’s worth of shaping forces acting upon it; foreign currency trading is a modern person’s game borne out of the trials and tribulations of many a trader before them.
Forex Today
Today, the Forex market is the biggest in the world with over $5 trillion being traded daily. In 2019, the total value of the Forex market came in at a staggering $1,934,500,000,000; that’s quite the rise from those early days of rudimental coin exchange. It’s easy to see why the growth has been so meteoric, after all, the world runs on money! The current demographic of Forex traders is primarily made up by younger people. In fact, in 2019 only 15% of traders on the market were over the age of 45; by contrast, around 40% were millennials. This younger swathe of the population engaging in foreign currency trading are tech-savvy individuals. It is these traders who will shape the future of the market.
The Future Of Forex
Where then does the future of such a massive market lie? A market so integral to the wellbeing of the financial sector that decisions cannot be made lightly. Well, there’s a train of thought that suggests someday there may be a singular global currency. This would thus render the need for a Forex market, and therefore Forex currency trading software, obsolete. However, even if this were ever to happen it would not be for decades, maybe even centuries yet. One thing for sure is that automated processes and foreign exchange software are going to play an increasing market role. Whether that be in the easing of traders’ decision-making or the rising influx of home traders. Technology and finance go hand-in-hand and that relationship will only strengthen as time goes on.
If you’d like to find out more about our Forex currency trading solutions, then get in touch with us today. Contact Impress Solutions on 01708 759 760.
