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A Short Overview Of The History Of Trading In The Western World

by CFD Guru Team   ·   

The internet has been one of the most revolutionary and disruptive technologies in history.

It changed human behavior in so many aspects including starting from listening to music, watching movies and communicating with each other to buying and selling products.

The Internet has also had a hugely beneficial impact on investing and made it easier for people to trade.

As many people think that stocks trading is a new way of earning a living and connect it with the development of technology.

However, trading has been around for more than a century.

Let’s do a short overview of the history of trading, see how technology has changed the way people trade nowadays and compare the trading a century ago to modern-day online trading.

History of the Stock Market

Stock symbolizes an investor’s ownership in a company and the people who own stocks are called stockholders or shareholders. So the shareholder theoretically owns a percentage of everything the company owns or owes.

Whether the company’s stock is traded at a higher or lower price, is determined by the company’s profitability or loss.

Stock markets were started when countries in the New World began trading with each other and the modern concept of a stock market began in the 16th century.

In 1602, the Dutch East India Co. issued the first paper shares.

This exchangeable medium allowed shareholders to conveniently buy, sell and trade their stock with other shareholders and investors.

Many pioneer merchants were fascinated by this idea of stock market and wanted to start huge businesses.

However, this required substantial amounts of capital that no single merchant had on his own.

That’s why they decided to partner with each other – groups of investors pooled their savings and became co-owners with individual shares in their businesses to form joint-stock companies.

The London Stock Exchange

Soon enough, the volume of shares increased and it became necessary to create an organized marketplace to exchange these shares.

So the stock traders made one of the coffeehouses in London their meeting place, which they used as a marketplace.

After a while, the investors took over this coffeehouse and in 1773 they changed its name to the “London Stock Exchange”.

This innovative idea soon made its way to the american colonies and they started with exchange in Philadelphia in 1790.

The Beginning of the Wall Street

While stock exchange has been around since the 16th century, most people associate the stock exchange to Wall Street, which opened on May 17, 1792 on the corner of Wall Street and Broadway.

24 supply brokers signed the agreement outside 68 Wall Street in New York, underneath the buttonwood tree and called it Buttonwood Agreement.

Later on, on March 8 1817, the group called itself the New York Stock and Exchange Board and moved to 40 Wall Street, where the organization, that defined the world’s economic future, was founded.

How technology changed the Stock Market

As the technology became available, the stock market joined the trend of digitization in 1987 as well. At that time, stockbrokers took orders from their clients over the phone.

Yet, many brokers were afraid of big losses and refused to pick up the phone – this partially led to the collapse of the market.

This downturn was seen as a terrible crush, but the resilient market bounced back and continued a Bull Run after just a few months.

However, the industry experts and players agreed that technology made trading more accessible to more people.

While trading before technology was only available to institutional players, innovative changes has opened doors for private and retail traders to join the Stock Market.

Online trading platforms

We mentioned above, that technology, in particular the phones changed the way people could trade and trading stocks was already available for masses as well.

Still, it wasn’t available to the amount of people it is available for now.

The advanced development of technology and internetization made it possible for anyone, from everywhere to join the industry, invest in stocks, become shareholders of the biggest companies in the world and earn great amounts of profits.

While in the old good times, it required to invest huge amount of money into stock trading, merchants were partnering in order to pool the amount of money to buy stocks they physically were holding.

Nowadays, it has all changed – you don’t hold the physical shares and you definitely don’t need a huge amount of money to start trading.

And all this wouldn’t be possible if it wasn’t for online trading platforms.

Nowadays, network of brokers organize the market demand and supply for CFDs (Contract For Difference) and make prices accordingly.

The CFD is a tradable contract between a client and the broker, who are exchanging the difference in the initial price of the trade and its value when the trade is unwound or reversed.

In other words, CFDs are not traded on major exchanges such as the New York Stock Exchange (NYSE).

There are numerous variety of online trading platforms, that make it possible for anyone to start trading with a small amount of investment as $100.

Even though different types of trading require different initial investment, starting day trading with at least $100 and profiting from it is still possible.

Freedom and flexibility for traders

Development of the technology hasn’t just made trading accessible to the masses, it also made it possible for traders to be more flexible and free.

What this means is that traders are now able to monitor their trades from anywhere as long as they have an internet connection.

As a result, traders have freedom, mobility and flexibility in their lives, which is one of the greatest advantages of becoming a full time day trader.

It’s also worth mentioning that before advanced technology and therefore creation of the online trading platforms, market information and data were either too expensive or too slow for the media to report.

However, digital technology has made trading mucn more easier as information and market data can now be instantly accessible and available right through the online trading accounts the modern day traders own.

Another great advantage of online trading platforms is that it gives traders flexibility in their everyday lives, meaning they don’t have to be attached to the computers screens.

Instead, they can trade from their tablets or even using their phones.

All the traders need, including up-to-date charting packages are now accessible through internet browsers, therefore the only thing the traders need to do their jobs is good internet connection.

Summary

Reading all these facts about the history of the Stock Market and the development of trading, you might think that this industry has developed so much, it can’t go further.

Yet providers and brokers always provide their clients with the latest features, platform updates and innovations that attract new clients and retain the existing traders.

It was once thought to be an advanced feature that was just ‘good to have’ in trading platforms.

Today, a charting package is a must in any online trading platform for traders to sign up.

And it’s just going to get better and more advanced.

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