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The Brief Background of Forex

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The forex market includes every currency denomination in the world since every nation imports and exports products. Generally, nations use their own currency to buy products from other countries. Whether it’s a trader looking to profit by trading a foreign currency, an American restaurant buying French wine, a Swedish furniture maker buying bolts from South Korea, or a tourist on vacation, each needs to trade currencies for any transaction to occur. These practical uses for currency trading create a fluid market for the forex speculator. However, unlike other types of trading, forex is a fairly new phenomenon.

The forex market is relatively new, only forming in the 1970s when countries gradually shifted to floating exchange rates. Until the 1970’s, and for the previous 100 years, the value of a currency was tied in some way to the value of gold. In 1944 the Gold Standard was abolished and replaced by the Bretton Woods Agreement which valued the United States Dollar against gold, and all other currencies against the US dollar. In 1975 that agreement fell apart and a system of floating exchange rates was widely adopted.

Despite formation of the forex market in the 1970s, access to the forex market by small speculators was very limited until the late 1990s, when widespread access to Internet technologies made market access practical. Today, individual speculators form a large part of the market, which had previously been accessible only by large commercial institutions.

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