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In order to gain a complete understanding
of what foreign exchange is, it is useful
to examine the reasons that lead to its existence
in the first place. Exhaustively detailing
the historical events that shaped the foreign
exchange market into what it is today is of
no great importance to the fx trader and therefore
we happily will omit lengthy explanations
of historical events such as the Bretton Woods
accord in favor of a more specific insight
into the reasoning behind foreign exchange
as a medium of exchange of goods and services.
Originally our ancestors conducted trading
of goods against other goods this system of
bartering was of course quite inefficient
and required lengthy negotiation and searching
to be able to strike a deal. Eventually forms
of metal like bronze, silver and gold came
to be used in standardized sizes and later
grades (purity) to facilitate the exchange
of merchandise. The basis for these mediums
of exchange was acceptance by the general
public and practical variables like durability
and storage. Eventually during the late middle
ages, a variety of paper IOU started gaining
popularity as an exchange medium.
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