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When did forex trading start?

Foreign exchange, or forex, is the largest and most liquid financial market in the world. It is estimated that over $5 trillion is traded daily in the forex market, making it a highly lucrative industry for traders and investors. But when did forex trading start?

The origins of forex trading can be traced back to ancient times, where merchants would exchange goods and currencies in order to conduct trade between different regions. However, the modern forex market as we know it today, with its sophisticated trading platforms and advanced financial instruments, has its roots in the 1970s.

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Prior to the 1970s, most world currencies were pegged to the US dollar, which was in turn backed by gold. This system, known as the Bretton Woods system, kept exchange rates relatively stable and prevented wild fluctuations in currency values. However, this system began to break down in the 1960s, as the US government printed more dollars to fund the Vietnam War and social welfare programs. This led to inflation and a loss of confidence in the US dollar, and other countries began to demand gold in exchange for their dollars.

In 1971, US President Richard Nixon announced that the US would no longer exchange dollars for gold, effectively ending the Bretton Woods system. This move led to a free-floating exchange rate system, where the value of currencies was determined by supply and demand in the market. This new system created opportunities for investors and traders to speculate on currency values and profit from changes in exchange rates.

The first forex market was established in the early 1970s in Chicago, where currency futures contracts were traded on the Chicago Mercantile Exchange (CME). These contracts allowed traders to bet on the future price of currencies, without actually buying or selling them. This was the beginning of the modern forex market, which has since evolved to include spot forex trading, options, and other financial instruments.

In the 1980s, advances in technology and telecommunications made it easier for traders to access the forex market from anywhere in the world. Electronic trading platforms were developed, allowing traders to buy and sell currencies in real-time. The internet further revolutionized the forex market in the 1990s, making it accessible to individual traders and investors.

Today, the forex market is open 24 hours a day, 5 days a week, with trading taking place in major financial centers around the world. The market is dominated by major banks and financial institutions, who account for the majority of daily trading volume. However, individual traders and small investors can also participate in the market, thanks to the availability of online trading platforms and low transaction costs.

In conclusion, forex trading has a long and fascinating history, dating back to ancient times. However, the modern forex market as we know it today began in the 1970s, with the end of the Bretton Woods system and the establishment of currency futures trading on the CME. Advances in technology and telecommunications have since made it easier for traders to access the market, and the forex market remains one of the most exciting and lucrative financial markets in the world.

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