The forex market has existed in electronic form since the 1980s. Back then, pre-internet, it was closed interbank system operated by Reuters which enabled banks to contact each other electronically for price quotes.
This early electronic platform existed alongside the existing global network of brokerage firms who relied on telephone contact between dealing desks.
The modern form of electronic forex trading was introduced in the early 1990s and over time replaced the telephone network and dealing desks. These new systems were matching systems and enabled the inter-bank market to enter bids and offers on currency trading prices from other banks. The systems would match buyers to sellers and quickly became the benchmark for currency prices.
But the real advances have come in since the year 2000 as the major international banks developed their own trading platforms. These currency trading platforms allowed the banks and their institutional clients to trade directly on live streaming prices fed over the trading platforms.
At the same time retail forex brokers developed online trading platforms for individual traders like you and me.
Another important change for the individual forex trader was the introduction of smaller lot sizes for trading. Traditionally the inter-bank forex market operated in lots 1 million ($ or £) but the retail brokers now allow individual traders to trade in lots of 100,000 or mini-lots of 10,000 base units.
Remember the price fluctuations are measured in very small amounts know as pips (0.0001) and the forex brokers offer large margin multiples from 50:1 to 200:1. So, a margin leverage of 200:1 would allow a forex trader with a $1000 margin deposit to hold a position of $200,000.
