One of the earliest known folklores dates back to the Stone Age of Northern Europe and the British Isles of 400 BCE around the time the Celtic tribes began migrating throughout these lands.

The tale was about small "fairy folk" that lived and hid within the forests. These little people would camouflage themselves by wearing green and were often referred to as elves or goblins. These magical “little people� were accused of causing various misfortunes throughout the new settlements, such as casting spells on cows and chickens to prevent them from producing milk and eggs. There were also several legends that told of these fairies kidnapping babies and taking them into the forests. It was believed that these magical creatures were afraid of the metal weapons used by the human settlers and so they were afraid of iron. The settlers began hanging iron horseshoes on their doors to protect their homes from evil spirits and the fairy folk.

Some believe that the horseshoe should always be displayed pointing up. This allows all the good luck and fortune to be collected and kept inside so that it doesn't fall out. Others believe the horseshoe should be displayed pointing down like an arch. This is so all the good luck and fortune pours out of the horseshoe and onto whoever walks through the door.