Forex history from the first trades up to USD 5 trillion per day

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Forex history: from the first trades up to USD 5 trillion per day

Forex is a relatively young market. These days, it would celebrate its 46 th birthday. Over the years, Forex has soared from nothing to today’s daily trade value exceeding 5 trillion US dollars. This is an impressive history, isn’t it? Let’s look at it in more detail and highlight the milestones of the new financial history.

Electronics and Bretton-Wood

In our initial text to this “Forex trading series” I explained that Forex means an international foreign exchange market i.e. cash-free exchange of two currencies. The cash-free form was a limitation for the Forex market because this required some inevitable technology i.e. electronics. If you talk about a cash form of forex one can say that the physical exchange of gold, currencies or any commodity has worked since ancient times.

The establishment of forex was conditioned by a certain stage of technological progress, primarily computers and the internet. In 1971, the first forex network was born and large organisations, typically central banks, commercial banks and investment institutions began to trade electronically. This enabled the establishment of the first forex market. In those days the world of currencies was subject to strict regulation due to the Bretton-Woods monetary management system leading to fixed currency rates.

The Bretton-Woods monetary system was based on a regime of fixed exchange rates. Currencies were pegged to the price of gold and the US dollar was seen as a reserve currency. Each member country had to keep the fluctuation of its currency within 1% around a pari value expressed in the US dollar. The system was adopted at the Monetary and Financial Conference in Bretton Woods (New Hampshire, USA) in 1944 and continued until its collapse in August 1971.

As you all know the principle of trading is that there must always be two sides in the market: one that sells and another one that buys. Once this balance is disturbed the exchange rate must change accordingly. With a fixed rate this principle does not work. To make things worse, in early 1970s the distrust in the US dollar was clear. Large institutions saw the Swiss franc and Deutsche mark as mmore crediblecurrencies.

This lack of balance inevitably lead to the collapse of the Bretton-Woods system. The system dissolved and the major currencies began to float against each other. The forex market started to shape up to its current form. Therefore, Forex has two birthdays: one is official (by the definition of foreign exchange market) in 1971, in the current form two years later in 1973.

Technological progress and retail traders

Next development is associated with technologies. In 2000, it was impossible for a retail trader (i.e. a small investor like you and me) to have access to a trading platform to see prices on-line. Trades would take place on a phone and paper basis. To access a trading terminal was a privilege of large corporations.

The spread of internet, programming languages and software in general lead to the launch of retail trading platforms from 2000 to 2005. This was heavily supported by less restrictive regulatory rules enabling to use leverage. Leverage is a topic I will explore later. Yet, some basics should be explained already. Forex markets use for trading a unit called lot, which is 100 000 units of a given currency (let’s say the US dollar). Naturally, it was too much for retail traders, so they invented leverage. In return for some small fee, you can borrow the amount of 100 000 units.

Forex market is writing history every single day. You can see the growing trading volumes. Nowadays, we are talking about a sum exceeding 5 trillion US dollars per day. What is also interesting is to watch the regulations limiting the use of leverage and other forex trading conditions. And what about you? Are you going to join? Would you like to write the new era of Forex?

Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

Forex Trades

GBP/CHF BUY 1.2025

EUR/USD SELL

NZD/USD BUY 0.5917

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EUR/USD BUY 1.0821

USD/JPY SELL 109.15

Trade Trader Return Pips
-0.8% MTM -1 MTM

EUR/NZD BUY 1.8296

0.0% MTM -6 MTM

AUD/JPY SELL 66.14

0.0% MTM 1 MTM

.de30cash SELL

AUD/CAD SELL 0.8542

-0.1% MTM -4 MTM

Oilmn-may20 SELL

GBP/USD BUY 1.2311

-0.9% MTM -4 MTM

EUR/USD SELL 1.0822

0.1% MTM 4 MTM

USD/CAD BUY 1.4100

0.0% MTM 1 MTM

USD/CHF SELL 0.9764

GBP/CHF SELL

EUR/JPY BUY 118.15

EUR/JPY BUY 118.15

EUR/JPY BUY 118.15

DE./30+ SELL 9,902

Gold SELL

EUR/AUD BUY

GBP/JPY SELL 134.42

0.4% MTM 2 MTM

USD/JPY BUY 109.17

-0.4% MTM -2 MTM

GBP/USD SELL 1.2314

0.0% MTM -1 MTM

AUD/CAD SELL 0.8538

-1.6% MTM -3 MTM

EUR/USD SELL 1.0825

XAU/USD SELL 1,632.07

Gold BUY

XAU/USD SELL 1,632.53

USD/CAD SELL 1.4094

-0.2% MTM -9 MTM

EUR/ZAR SELL 20.6146

EUR/USD SELL

EUR/USD SELL 1.0826

0.5% MTM 4 MTM

GBP/USD SELL

GBP/CAD BUY 1.7365

-8.1% MTM -9 MTM

EUR/JPY SELL 118.18

.de30cash BUY

GBP/USD SELL

EUR/GBP BUY 0.8793

-9.9% MTM -4 MTM

GBP/USD BUY

Apr Rank/Explorer Apr Return Trader Return/Days
#1 3
#2 secondary
#3 Kesum Empire FX
#4 x 406
#5 SHR
#6 NAGA BUY & SELL
#7 reza888
#8 MaxProTrade
#9 Naga 2
#10 sultana
Instrument Long Traders Long Lots Long Traders / Lots Short Traders Short Lots Short Traders / Lots Detail
  • 50% 261 Traders
  • 262 Traders 50%
  • 67% 326.4 Lots
  • 162.4 Lots 33%
  • 44% 126 Traders
  • 158 Traders 56%
  • 29% 17.1 Lots
  • 42.3 Lots 71%
  • 53% 115 Traders
  • 101 Traders 47%
  • 44% 19.1 Lots
  • 24.2 Lots 56%
  • 53% 59 Traders
  • 52 Traders 47%
  • 51% 10.8 Lots
  • 10.4 Lots 49%
  • 36% 60 Traders
  • 109 Traders 64%
  • 52% 39.7 Lots
  • 37.2 Lots 48%
  • 50% 97 Traders
  • 97 Traders 50%
  • 73% 21.8 Lots
  • 8.1 Lots 27%
  • 42% 54 Traders
  • 75 Traders 58%
  • 38% 7.4 Lots
  • 12.1 Lots 62%
  • 44% 61 Traders
  • 78 Traders 56%
  • 28% 5.6 Lots
  • 14.1 Lots 72%
    Data Source: Trade Explorer

The data on this page is sourced from traders using Forex Factory’s Trade Explorer, a web-based interface that empowers traders to intelligently analyze their trading performance.

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Forex Factory® is a brand of Fair Economy, Inc.

What is Forex?

The foreign exchange market – also known as forex or the FX market – is the world’s most traded market, with turnover of $5.1 trillion per day.*

To put this into perspective, the U.S. stock market trades around $257 billion a day; quite a large sum, but only a fraction of what forex trades.

Forex is traded 24 hours a day, 5 days a week across by banks, institutions and individual traders worldwide. Unlike other financial markets, there is no centralized marketplace for forex, currencies trade over the counter in whatever market is open at that time.

How FX Trading works

Trading forex involves the buying of one currency and simultaneous selling of another. In forex, traders attempt to profit by buying and selling currencies by actively speculating on the direction currencies are likely to take in the future.

World’s Major Currencies

COUNTRY SYMBOL COUNTRY SYMBOL
United States USD Switzerland CHF
Eurozone EUR Canada CAD
Japan JPY Australia AUD
Great Britain GBP New Zealand NZD

Learn more about which currency pairs to trade.

Want to know more about how to trade forex?

Our free Let’s Get to Know Forex guide will cover how to get started, help you make your first trades and outline how to create a long-term trading plan for long-term success.

*April 2020 Interbank Forex Market average daily volume from Bank for International Settlements.

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