The Evolution of Trading: Then and Now

The roots of trading stem back to the earliest of times. In our time, trading has become a complex matter based on online algorithms. There are trillions worth of assets being traded every single day. Some rapidly traded assets are foreign currencies and cryptocurrencies, which are both defined by volatile markets and large risks. You can even trade derivatives that follow the price of a specific asset, so you don’t have to buy the assets in itself. These could be CFDs (Contracts for Difference), which provide a flexible method for traders to take advantage of the fluctuations of, for example, cryptocurrencies. CFD trading South Africa and many other places in the world plays a large role in the trading system today. But trading hasn’t always been defined by such complexity. Once upon a time, trading was a lot simpler. Throughout the last couple of thousands of years, trading has evolved, expanded and advanced into the system that is used today.

From Barter system to currency system

In the ancient era, people started trading. Back then, they’re trading system was a barter system where you traded goods or services for other goods and services. If you had some wood, you could exchange it for some fish. If you could provide a service, you could trade this for goods and the other way around. It was a simple and pretty straightforward system. The way we trade today does have some traces from their barter system though. Back then, they based the value of goods and services on factors like usefulness, rarity and demand – exactly as is the case today. At some point around the 7th century, the barter system evolved into a currency system. Currencies started as elements like metals, shells and beads. Over time, these were transformed into coins and, eventually, paper money.

Intermediaries, stock exchange and telephone trading

A thousand years later, in the 17th and 18th centuries, things really started to change. Stock exchange was introduced, and suddenly, you could buy and sell company shares. With this new system, many new rules and regulations made trading a lot more structured than ever before. People started working as brokers, and new financial intermediaries saw the light of day. Banks and merchants took on a vital part in making transactions easier, introducing credit solutions and safeguarding assets. This era laid the groundwork for the system that we still use today. 

Electronic exchanges and online trading platforms

At the beginning of the previous century, telephone trading was made possible by new technology. Distance suddenly became irrelevant as trading could suddenly happen over the phone. The world became a lot bigger, and so did the trading opportunities. This introduced a completely new speed within the world of trading – a pace that still defines trading today. 

Around 1980, one of the most revolutionary technological advancements was invented – the internet. Officially on January 1st, 1983. This was a massive turning point in trading. It made it possible to trade assets and financial instruments electronically. The new systems enabled traders to buy and sell online. At this point, this wasn’t widely accessible, though. In the beginning, it was mostly the larger institutions that were able to use the new trading systems. But as the internet grew, so did the possibilities for smaller companies and individual investors. Online brokerages were introduced and quickly rose in popularity amongst traders worldwide. From your own computer, you were now able to trade everything from options and stocks to financial instruments. 

Algorithmic trading 

From the 90s until now, electronic trading has continued to advance. The online platforms changed the entire way that the financial markets operate, and everything became continuously easier, faster and more accessible. In those years, there have been a lot of ups and downs for the financial markets—the biggest one was in 2008 when the world suddenly faced a global financial crisis. New rules and regulations were implemented. Suddenly, there was a highly increased focus on risk and financial security. Algorithmic trading developed over the years and was widely implemented in the early 2010s. The use of artificial technology took on a larger role, and algorithmic trading started accounting for a large part of the trading activity.

In the mid-2010s, there was a new-found focus on offering algorithmic trading solutions to individual investors. This meant a slowly increased growth in online trading, making it mainstream among many new groups. In 2023, algorithmic trading still plays a dominating role in trading. New technological advancements like big data and quantum computing are paving the way toward the trading of tomorrow.