Forex A to Z – Learn the Basics of Forex Trading

HISTORY OF FOREX TRADING: WHERE IT ALL BEGAN

The Forex market started from trade by barter. The barter system is the oldest method of exchange and began in 6000BC, introduced by Mesopotamia tribes. Under the barter system goods were exchanged for other goods. The system then evolved and goods like salt and spices became popular mediums of exchange. Ships would sail to barter for these goods in the first ever form of foreign exchange. Eventually, as early as 6th century BC, the first gold coins were produced, and they acted as a currency because they had the critical characteristics like portability, durability, divisibility, uniformity, limited supply and acceptability.
Gold coins became widely accepted as a medium of exchange, but they were impractical because they were heavy. In the 1800s countries adopted the gold standard. The gold standard guaranteed that the government would redeem any amount of paper money for its value in gold. This worked fine until World War I where European countries had to suspend the gold standard to print more money to pay for the war.
The foreign exchange market was backed by the gold standard at this point and during the early 1900s. Countries traded with each other because they could convert the currencies they received into gold. The gold standard, however, could not hold up during the world wars.