Everyone has heard of the Forex Market, but what about its history? When was this market established. Let’s look into the history of the Forex Market.
February 7, 2019, | AtoZ Markets – Unlike the stock or precious metal exchanges, the Forex market is not unanimous neither it is centralized. Instead, it is built on the banking system. National and large international banks provide the basis for the Forex market. Each operation ultimately passes through those banks, which gives them great power and influence.
History of the Forex market begun in 1980’s
The name of the FOREX market comes from “currency exchange” (FOReign EXchange). While some people think that the Forex market will disappear, it is important to understand why this market is likely to remain longer.
Forex as a concept appeared first in the 1980s after the gold standard was abolished. With nothing backing your paper money, the world needed to exchange currency. The original version was a large interconnected network of the national banks that processed orders on behalf of their clients. There was no trade, only currency exchange for the needs of foreign trade. After international banks joined the Forex market more companies started to use Forex. Some of the global corporations have even installed their own Forex terminals in order not to depend on the banks.
Major Forex players
Among Forex participants we can count central, investment and commercial banks, dealers, brokers, various funds, insurance companies, and large multinational companies. National banks, international banks, and global corporations are the three main players in the Forex market. Each major player has enough influence alone to change the financial situation on most currency pairs.
Profit is not the final goal for the Forex player. This is explained by the fact that the volumes that they can receive in Forex are insignificant compared to their profits. The main players – national banks, international banks, and global corporations – seek to influence the price in their favor.
Minor Forex participants
By the 1990s, it became apparent that the amount of currency in Forex, as well as its high volatility, provide ideal conditions for trading. The new discovery caused an influx of opportunistic traders into the Forex market. Opportunistic traders proclaim themselves to be an interactive community that helps other traders of all levels across all asset classes become more informed and more consistent. However, not all of them were influential enough to afford membership – and yet they were willing to pay for it.
Minor players – investment funds, brokerage companies, and private traders – use the movements created by the main players and trade them. Investments and hedge funds, brokerage companies and private traders are minor participants in the Forex market. Their Forex trading strategy is based on profit maximization. However, a large group of small players may accidentally influence the market when they combine their influence
Forex trading went online in 1996
When the initial online trading platforms appeared, the Forex supporters started to think about introducing online Forex trading platforms. The first version of Forex based software was presented in 1996. Since the online trading platform introduction, everyone could trade in Forex. Although the trader had to pay $ 6,000 for a terminal and $ 300 for a transaction.
Forex market was flooded with investments and hedge funds and small traders remained dissatisfied. Not every player could afford to support their banking terminal. Ultimately, Forex brokers became the main gateway to Forex for private traders. In addition to the terminal access at Forex, brokers provide traders with options for leverage, technical analysis and other forms of support. However, in the last decade, many scammers appeared among brokerage companies, which made global financial authorities to tighten supervision of the brokers.
Think we missed something? Let us know in the comments section below.