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Is Forex Legit or Not? Here the Explanation

Forex (foreign exchange) or foreign exchange market, can be abbreviated as forex is a type of trade or transaction that trades the currency of a country against the currency of another country (currency pairs / pairs) involving the main money markets in the world for 24 hours continuously. sustainable.

In simple terms, forex trading is like buying a foreign currency and then storing that currency for a certain period of time and reselling it when the currency's value increases or the exchange rate strengthens.

History of Forex Trading

In its history, forex trading in the late 90's, only the rich, large financial institutions such as central banks, private and government banks, and large commercial companies such as Apple or Toyota did this business. They do forex trading usually for trading purposes, paying debts, hedging (hedging), or investing. The capital required is also quite large, and not just anyone can do forex business.

After the development of the internet around the world in the late 90's, the forex market can finally be followed by almost all individuals, from entrepreneurs to housewives, parents and young people. Brokers also began to structure forex so that it could be traded on a retail basis by each individual. So now, starting from money changers, banks, to motorcycle taxi drivers who hang out can also enter the Forex market.

History of Modern Forex Trading

Exchanging money has been going on since time immemorial, but the history of modern forex trading as it is today actually only started after World War II. For information, there was a lot of chaos and economic crisis at the end of World War II, so that the governments of the Allied countries felt they needed a system that would later be able to unite the global economy. Then the “Bretton Woods System” was formed to realize this dream.

In the Bretton Woods System, which was born in the city of Bretton Woods, the state of New Hampshire, United States in 1944, for the first time there are official rules to regulate monetary relations between countries. The United States, which at that time held two-thirds of the world's gold reserves, insisted that the system be based on gold and the US dollar. Finally, this system requires all countries involved to relate the value of their currency to gold and the US Dollar. However, it did not last long.

On August 15, 1971, the United States unilaterally severed its currency from gold, thereby automatically ending the Bretton Woods system. The value of the dollar is no longer obtained from its gold reserves, but only from the promises of the US government. This action certainly makes the US Dollar a reserve currency for many countries in the World. At that time, the exchange rate between currencies was no longer determined by standard, but by following a simple economic system, namely demand and supply. A new phase was born in the history of forex trading, namely the floating exchange rate system.

The Era of Online Forex Trading

The development of the global economy between the 80s and 90s then led the world to a new development in the history of forex trading in which people could participate in the world, which was previously dominated by large banks and international companies. Transactions through banking intermediaries no longer have to be initiated by telephone contact, but simply with instructions via the internet. In fact, a trading platform was created that allows anyone to see the "price" (currency exchange rate) and trade currencies in real-time.

The development of this technology is a crucial point in the history of forex trading, because it has pushed trading volume in the forex market so far to become the largest financial market in the world with daily liquidity reaching USD 5.3 trillion in 2013. At this time too, you can find out which currency only those who are heavily traded and seek to profit from the strengthening or weakening of currency exchange rates.