A closer look at the forex trade as carried out a few years back and forex trade as carried out a few years back and forex trade as carried out today shows that the way the forex trade was carried out a few years back and the way it is carried out today is so different that the olden and the modern approaches can be seen as two different forex trades.
The olden and modern forex trades differ in at least three different ways, namely, the players, the platforms and the volumes of the trade.
As it were, in terms of players, the olden forex trade was basically a preserve of the rich, sophisticated and well connected people in those days. An ‘ordinary’ person trying to get into forex trade in those days faced a lot of barriers. First there was the information barrier – as there was so little information in the public domain about the workings of foreign currency trade and so few ways of getting that little information short of taking a correspondence course of forex trading (too much of a hassle, many would feel) or buy a book on the subject (not comprehensive enough, others would feel). Then there was the legal-political barrier to entry. As it were, governments used to impose very strict controls on who could and who couldn’t hold foreign currencies in their territories and it often turned out that only the people who were very well connected politically (and to be this you had to be quite rich) could be allowed to trade in foreign currencies. There was of course a financial barrier to entry, as the only way to operate as a foreign currency trader in those days was if you were a bank (and people therefore knew you were dealing in foreign currencies) or you were operating a foreign currency bureau. Obviously setting up these things was an expensive thing to do – but thankfully, they are no longer absolutely required in the modern forex trade.
In terms of platforms, while modern forex trade is mainly conducted on automated online platforms, the olden forex trade was mainly conducted through tools like the phone (where a person could call their bank and ask them to sell so many units of such and such a currency), the fax and or in some cases simply manually – where a person would walk into a bank and ask for such and such a currency, and then proceed to wire it to another person in another country, and so on. These platforms are of course still in use – forex bureaus are still a common feature on most airports for instance – but there is no denying that a considerable portion of their business has been taken over by online forex trading platforms, which the players who used these ‘traditional’ platforms have also adopted with time.
In terms of volumes, the olden players in forex trade used to move very huge volumes as there were relatively few players to serve the forex needs of the time. These volumes per player have however been getting progressively lower as more and more (smaller) players get into the field to share in the business.