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The History of the FX Market

Foreign exchange has been around since the beginning of currency and trade between nations, time out of mind. The Bible mentions foreign exchange (now known as FX) in several places, most famously in the passage in which Jesus overturns the tables of the moneychangers. Because the Jews were required to go to the Temple every year, no matter how far away they lived, after the Diaspora they came from different nations all over the Mediterranean world, and brought their own home currencies with them. In order to buy sacrifices at the Temple, they had to change their currencies, and the money changers often took a commission on top of the exchange. This is what Jesus meant when he said, "you have turned my father's house into a den of thieves." He was criticizing these early FX traders for using the Temple for their own wealth creation.

Now, of course, we do not think of FX traders as thieves (because they are not), but it is still probably inadvisable to do your trading in a place of worship.

In the Medieval and Renaissance era, FX trades took place as a result of trade with the East in exotic items such as spices and luxury fabrics. With the formation of the East India companies in the Early Modern era, the practice of FX trading expanded still farther, with many investors making their fortune through wealth creation in international trade.

During all this time, the major currencies of the world were minted in precious metals, and later currencies were printed on paper but were pegged to precious metals. The Gold Standard was important for FX trade, because it guaranteed that all currencies were at least relatively close in value to each other, all being connected to certain weights of precious metals. However, in the 20th Century most major currencies went off the gold standard.

After World War II, the Bretton Woods Accord pegged some of the major currencies in the world to each other, allowing only a 1% fluctuation between them. This state existed until Nixon ended the Bretton Woods Accord and allowed for a free-floating exchange system. From the 1970s to the present, foreign exchange trading has only been increasing, allowing many people to engage in wealth creation on the FX market by taking advantage of the changes in currency rates between nations. In 1973, computer monitors were added for the first time, making it much easier to see the movement of rates and making obsolete the telephone calls and telex system that the trades had been performed on beforehand.

In the 2000s, FX has exploded in popularity, to the point where it has practically replaced day trading in stocks and penny stocks as the wealth creation means of choice for many individual investors. In fact, for many investors, it is possible to make a comfortable living and more simply through trading in FX currencies online every day. FX trading is often more convenient than stock trading, for two reasons: first, FX markets are always open, because it is a global trading network; and second, there are only a few currencies to keep track of, as opposed to hundreds and thousands of stocks on the stock market.

About Author Darren Page :

Darren Page is a professional trader, investor, entrepreneur and founder and CEO of Zappy Wealth. He is highly regarded among his peers and is a regular contributor on many trading related article sites. Darren runs regular webinars for his clients, is RG146 qualified in Foreign Exchange and has developed several automated trading systems. Check out the website and receive access to some great free content on trading.
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Article Added on Friday, May 30, 2014
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