January 22, 2019

Trading: back to the roots

Trading: back to the roots

Trading goes back further than 3000 BC when we began to trade goods and services with each other. It can be as simple as trading a piece of wood for a gallon of water.

Let’s see how the building blocks for modern trade began.

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The evolution of currency

When we think of currency, we often think about coins and paper, which were created in 600 BC. The first coins were created in Lydia (modern day Turkey), and they were known as electrum – an alloy of gold silver and copper. Surprisingly the weight of each coin didn’t matter, and it was used by who were large private merchants.

The first paper currency was created around the 6th century by the Chinese, and it was mostly in the form of privately issued bills or exchange notes.

The first commodity currency was created millennia ago, and since the beginning, early civilisations cared more about food than shelter.

Goats and pigs might have been the earliest commodities, but this soon changed into gold and silver as a medium of exchange.

In the early days, gold and silver were valued primarily for their beauty. These metals were mostly owned by royalty (imagine every Disney movie).

As the centuries passed, gold and silver evolved into media of exchange in their own right. They were used to pay for goods and other commodities or to pay for labour.

The evolution of the market

Markets, like currencies, were created around 3,000 BC in different parts of the world. They may be called a souk (Arabic), Bazaar (Persian), Agora (ancient Greece) and more; but they have one thing in common: they were places dedicated to exchanging a wide range of merchandise, such as animals, tools, vegetables etc.

Merchants began to travel between markets that were sometimes close by and sometimes a month’s travel. This started ”travelling merchants” (ancient Import/Export) who dealt in different commodities. Strategies that traders use today were applied back then as well.

In 1200 BC Phoenicians emerged as the leading naval and trading powers of the Mediterranean. Keeping a fifth of the profits from successful voyages, Phoenician traders increased their gains in what future brokers will eventually call ‘’performance fees’’.

300-400 BC a Greek merchant used a financial device to profit from the annual olive harvest. His speculation was one of the earliest cited examples of ‘“Options trading’’.

In 1929 when the market went into a free fall, and while a decade-long depression took hold, Roy Neuberger emerged untouched by balancing short and long investments.

The markets, as well as technologies, are evolving at an ever-increasing rate. We are still at the beginning, and the future looks promising. AvaTrade embraces the future and keeps evolving to stay abreast of the changing times.

How has your trading changed over time? Do you regret the past or do you look forward to seeing what the future will bring?

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