Forex trading, also known as foreign exchange trading, is the buying and selling of currencies from different countries. It is the largest and most liquid market in the world, with an estimated daily turnover of over $5 trillion. The history of forex trading can be traced back to ancient civilizations, but it was not until the 1970s that it became a popular form of investment.
The modern forex market was created in the 1970s, after the collapse of the Bretton Woods system of fixed exchange rates. Before this, countries fixed the value of their currencies to the US dollar, which was in turn backed by gold. However, the system became unsustainable as the US accumulated large trade deficits and printed more dollars to pay for them. In 1971, the US government ended the convertibility of the dollar to gold, and other countries were forced to float their currencies.
This led to the creation of the interbank market, where banks traded currencies with each other at market-determined exchange rates. The first electronic trading platform, Reuters Dealing, was launched in 1981, allowing banks to trade currencies electronically. This paved the way for retail forex trading, which became possible in the 1990s with the advent of the internet.
While there is no single person who can be credited with inventing forex trading, there were several key figures who played a role in its development. One of these was Richard Nixon, the US President who ended the convertibility of the dollar to gold. This decision paved the way for the free-floating exchange rate system that exists today, and allowed currencies to be traded based on their supply and demand.
Another important figure in the history of forex trading was John W. Henry, a successful futures trader who founded John W. Henry & Company in 1981. Henry was one of the first traders to use computers to analyze market data and make trading decisions, which revolutionized the way trading was done. His company was also one of the first to use algorithmic trading, which uses computer programs to execute trades based on predefined rules.
In the 1990s, retail forex trading became possible thanks to the advent of the internet. This allowed individual traders to access the interbank market and trade currencies from their own computers. One of the first companies to offer online forex trading was Refco, which launched its platform in 1999. Other companies soon followed, and today there are hundreds of forex brokers offering trading services to retail clients.
In conclusion, forex trading is a relatively recent development in the history of finance, but it has quickly become one of the most important markets in the world. While there is no single person who can be credited with inventing forex trading, it was the result of a series of events and innovations that led to its creation. Today, forex trading is accessible to anyone with an internet connection, and it remains a popular form of investment for both retail and institutional traders.
