What is forex? This is the exchange of one currency for the other in the market. Many are aware of the market but not so many are well informed about how the fx market came to be. According to reputable statistics, it has been observed that the advancement in technology has changed the face of the market to a great extent. In the time past, there were not as many traders as there is today because the mode was not so accessible to many. These days, many traders can trade the market as long as there is access to the internet.
WHAT WAS THE FOREX MARKET LIKE BEFORE THE ADVENT OF INTERNET TRADING?
Before the internet came to be, fx was traded basically using phones and faxes. It is quite easy for one to trade with the use of phones and faxes, but how does one get the right information on what and when to trade? That was what placed a limit to trading in the past.
Before fx became what it is today, different efforts have been made to have a global economic management system. First, it was the Gold Standard monetary system where gold backed up currencies around the world. The inefficiency in the demand and supply of gold made it impossible to circulate enough gold to back up the numerous currencies in circulation at the time. In addition to insufficient gold in circulation, the World War II also contributed to the low availability of gold. After a while, the Gold Standard of monetary system collapsed and was replaced by the BWS. The most notable thing about the BWS was that gold would back up just one currency instead of all the currency there is. Other, having lost gold as a backup to their currency, adopted the US dollar as currency backup purposes. With time, the BWS collapsed like the Gold Standard monetary system for the same reason; insufficient gold to back up the dollar.
THE MODERN FOREX MARKET
The Gold system and the BWS gave the dollar some leverage over other currency because, at the time of the BWS, many national economies were reserved in dollars. The dollar had high economic stability and wide acceptance. Nations will convert their money to dollars to avoid being negatively affected by the adverse economic situation, and that is nothing but fx. They sell their local currency in exchange for dollars because they suspect that the value of might depreciates.
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