History of Trading

You will be surprised to know that the first genuine stock markets didn’t arrive till the 1500s. But people still traded at that time. Trading had a system similar to how we trade today.

Trading has played a major role in raising the economy of countries. While the New York Stock Exchange (NYSE) is arguably the most powerful stock exchange in the world, it was not the first exchange to exert influence on the markets.

Where it all started.

Antwerp in Belgium saw the beginning of all trade which mostly took place in coffee shops during the 1400s and 1500s. Whoever wanted to buy or sell, would meet at a set time and location like this to discuss and make deals on paper. Slowly the system evolved.

The idea of trading goods dates back to the earliest civilizations. Early businesses would combine their funds to take ships across the sea to other countries. These transactions were either implemented by trading groups or individuals for thousands of years.

Merchants would assemble in the middle of town to trade goods from other countries. Then came the need to establish a money exchange so that trading transactions could be done fair and square.

Who invented the first stock market?

The East India Company is widely recognized as the world’s first publicly traded company. There was one simple reason why the East India Company became the first publicly traded company: risk.

Even though the East Indies was discovered to be a haven of riches and trading opportunities, sailing to the East was risky for both – the investors and the sailors. Some did not return back from their voyage. So investors were at huge losses, there was loss of life, treasure wars squandered and much more. Something had to be done to improve the situation. Hence the East India Company was discovered. It was the first company to use a limited liability formula.

People realized that they needed to put their eggs in multiple baskets and after people started investing in multiple voyages, there were more chances of profit. This formula proved to be very successful and thus spread to other countries. In 1602, the Dutch East India Company officially became the world’s first publicly traded company when it released shares of the company on the Amsterdam Stock Exchange.

How trading continued in India

The humble beginnings of trade started under a banyan tree. When the East India Company began trading in loan securities, corporate shares started being traded in the 1830s in Bombay (now Mumbai) with the stock of bank and cotton presses. The Bombay Stock Exchange began with only 318 members. But today India has around 24 share markets in the country.

Stock markets took centuries to evolve into what it is at present. Traders have so many services to choose from. Today, transactions have become electronic and the total time taken to issue a stock trade has been reduced to seconds. What next?…

Robo Investors

The advent of the internet significantly changed the way the stock market functioned. You guessed it – AI entered the market. Algo trading or algorithmic trading are like a set of rules for AI to help you trade better. These rules are based on historical data. In the U.S. stock market, about 70% of comprehensive trading volume is initiated through algorithmic trading. Another popular form of algorithmic trading is High-Frequency Trading. This type of trading involves vast volumes of stocks and shares, sold and bought mechanically at very high speeds. HFT tends to develop continuously and will become the most authoritative form of algorithmic trading in the future.

Machine Learning will also start giving real-time advice on trading. In fact you can say that the advent of robo investors are due to many reasons like, ease of trade, speed, knowledge gaps and more. But one of them is also the lack of trust of human advisors. Trusting AI may sound easy but it will never negate the need for human intervention at some stages of investing.

In this case maybe a hybrid model is the way to go ahead don’t you think?

If you are a beginner you can check our blog on What is a trading account: The beginner’s guide

The Future of Stock Markets

We will likely see stock markets continue to merge over the coming years. Some have even suggested that we’ll eventually see a single global stock market, although this appears to be unlikely.

Whatever the future may hold for stock markets, they’re going to continue playing an important role in global economies around the world for the long foreseeable future.

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