A history of Forex trading...

‘Forex' is generally known as the ‘foreign exchange market'. This exchange market deals with the trading of currency from one trader/business to another. With the value of foreign currencies increasing a decreasing all the time, traders are able to buy foreign goods at a foreign price, and re-sale them at their own currency price, thus making a profit. ‘Forex' initially began in the 1930's and has since grown drastically with a number of extremely large businesses and small traders/businesses trading 23 hours a day, 5 days a week. There is now almost £1.7 trillion traded each day, with this amount rapidly increasing each year. ‘Forex' came about when in the 1970's when countries currency exchange rates switched to floating exchange rates rather then the fixed exchange rate, that had been created just after World War 2. After World War 2, there was a great urge to start the re-building of the world's economic system. To help this 44 allied nations met in Bretton Woods, New Hampshire, United States to sign an agreement that would create a fixed trading currency throughout these nations.

After three weeks of deliberating it was agreed that from then on that every nation's currency value would be fixed to that of the American dollar with only a small margin allowance. Furthermore many countries were able to equal out the currency value with an equivalent amount of gold. Not one of these nations was allowed to devalue their currency by any means, thus helping the economy stay reasonably stable for a good while. This ‘Bretton Wood's agreement' which was agreed a signed in July 1944 did however then change due to the system suddenly collapsing in 1971. Subsequently the USA had ended the convertibility of dollars to gold causing an increased strain amongst the world's economy. Since then, the alteration of fixed currency rates to floating currency rates has allowed many businesses around the world to turn over a large profit from trading. This way of trading value's of currency could be a great risk to many investors, however because the trading counter is always open there is believed to be a good deal of market liquidity.

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