Forex History

Why FOREX HISTORY well as the saying goes you’ve got to know where you’re coming from to know where your going. Failure to understand the past limits how you understand the present and the future.

Truly great history is not subtle. It smacks you in the face. You know it at the time you’re watching it — you’re seeing something that’s for the ages. ~Tom Verducci 

Well so well start at the beginning with the end of the second world war. At this time the world was experiencing so much chaos that the major western banks felt they neededto create a system that would stabilize the global economy. This system would come to known as the “Bretton Woods System,” this agreement set the exchange rate of all the currencies against gold. This system stabilized exchange rates for a while, but as the major economies of the world started to change and grow at different speeds, the rules of the system soon became obsolete and limiting.

When they tried it first, it was difficult to determine fair exchange rates, but thanks to advances in technology and communication eventually made things easier.
As the 1990s came to be, thanks to the various computer nerds and the exponential growth of the internet (many thanks to you Mr. Al Gore), banks had started creating their own trading platforms. These bank platforms were designed to stream their live quotes to their clients so that they could instantly execute trades themselves.
In addition, some savvy business-minded marketing machines introduced internet-based trading platforms for individual traders.
This platforms went by the name of “retail forex brokers”, these platforms made it easy for individuals to trade by allowing smaller trade sizes. Unlike what was seen in the interbank market where the standard trade size is one million units, retail brokers allowed individuals to trade as little as 1000 units!
As we all know in all business transactions, there is a catch. Here its bid/ask spread.
As we saw before, only the big speculators and large investment funds could trade currencies, but because of retail forex brokers and the Internet, this isn’t the reason anymore.
With almost no barriers to entry, anybody could just contact a broker, open up an account, deposit some money, and trade forex from the comfort of their own home. Brokers basically come in two forms:
  1. 1.Market makers, as from their name  “make” or set their own bid and ask prices themselves and
  2. Electronic Communications Networks (ECN), who use the best bid and ask prices available to them from different institutions on the interbank market.


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