Are you wondering how Forex trading worked before the internet era? How did investors manage their funds and stocks without viewing real-time trends and alerts from multiple sources?
Learn more about Forex trading and how it operated before the boom of easy-to-access digital information on the internet. Continue reading below.
Forex Before Internet
The Forex Market is now the largest market worldwide. But trading in the past was not as easy as it is now. It was much more complicated when information was not readily available at the touch of a button.
Before the internet, information about changes in the position of stocks, new trends, sudden movements, and more was relayed through telephone wires. The transmission of information wasn’t as quick as today, but it was sent and used nonetheless.
How Did Investors Profit?
Investors didn’t have the advanced trend analyzers we have today, so they developed various methods to earn as much profit as possible. Before the World Wide Web, investors generally performed scalping. What is Forex scalping? Simply put, it’s a method of collecting small profits through several trading positions in just one day.
Key Events in the Forex Market History
To understand how the Forex market developed into what it is today, let’s briefly look at some of the key historical events that affected it.
The Bretton Woods System
By the end of the Second World War, the US, UK, and France convened in Bretton Woods, New Hampshire, to plan how to bring order to the economy and help other global economies recover.
The result was an adjustable pegged foreign exchange market where one currency was fixed in relation to another. Because the US was unharmed by the war and had the most stable economy at the time, other countries pegged their currency to the US dollar.
The Free-Floating System
During this time, the US based its dollar value on gold at $38 per ounce. Other currencies were paired to the US dollar while the dollar was pegged to gold.
European countries established the European Joint Float, not wanting to depend on the US dollar. However, this agreement eventually collapsed, giving rise to the free-floating system.
The Plaza Accord
The dollar’s value rose in comparison to the other primary currencies. This resulted in many problems such as inflexible export rates, decreased GDP, and inflation.
To address the many issues, representatives of the US, Great Britain, France, West Germany, and Japan met at the Plaza Hotel in New York City. They were pressured to announce the appreciation of the non-dollar currencies.
Under the Maastricht Treaty, the European Union (EU) was created. This eventually led to the birth of a new currency: the Euro.
The Rise of the Internet
The Forex market is believed to have started in Amsterdam, helping stabilize currencies by letting traders freely exchange currencies. Today, it has come a long way and has become more accessible than ever, with more than $5 trillion in trades taking place every day.
Traders can now exchange anywhere and anytime with the real-time reflection of the newest updates on the market. Many other programs have been developed to help traders make informed decisions to make the most profit.
However, the rise of the internet also means more competition, requiring traders to be more vigilant and competent in their actions.
Forex Market and the Pandemic
At the beginning of the pandemic, the Forex market seemed to operate as usual. However, as the effects spread and affected many industries and businesses, its consequences gradually impacted the Forex market.
Countries with rising virus cases saw their currency weaken against the others. The opposite is true for the countries that handled the pandemic well, with their economy becoming stronger.
Although vaccines are now available, the appearance of a new strain of the virus made the Forex market more volatile. This trend appears to continue, making it harder to predict what the future holds for the market.
The internet caused significant changes to how Forex trading was performed, providing pertinent and critical information traders could use to chase profits. Although widespread and ever-evolving, the Forex market is still volatile and can be affected by many factors, such as the pandemic.
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