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Jump back in time about 150,000 years and you might have enjoyed the
same sense of satisfaction having successfully exchanged one valued
item (in this case stock in a company), for another (money). But
trading and commerce must have been radically different to observe.
Trade probably originated at the same time as, or shortly after,
communication. Both communication and trade date back to prehistoric
times and trade certainly takes place through much if not all of
recorded history. Those who have difficulty understanding the trading
practices of the stock market may find it easier to relate the trading
practice to the earlier examples. For example, during the Stone Age,
there is evidence the stone material flint was traded for obsidian, a
kind of volcanic rock sometimes used to make glass. The basis of this
trade practice, trading obsidian for flint, presumably rests on the
respective uses of the materials and the varying degrees of
availability of the materials for the parties involved in the trade.
If group A has an abundance of obsidian and they have found a use for
it (for example, it is a good building material) then it is in their
interest to control the source of the obsidian. In a similar way, a
company that manufacturers a particular type of drink, for example,
Coca Cola, knows it is in their interest to protect the materials, in
this case, a recipe and list of ingredients, used to obtain the
finished product.
If group B has an abundance of flint and plenty of uses for it, they
are also likely to secure and maintain a controlling interest over the
source of the material so they can use it over time.
As communication develops, however, groups A and B become aware of the
values of the products belonging to the other part. Group B hears about
the many uses for obsidian while Group A hears about the uses for
flint. They decide to make a trade and, at some point, make a
determination whether obsidian and flint are worth equal amounts. To
make the trade, groups A and B need to determine whether one unit of
obsidian is worth one unit of flint. Factors that would determine the
value of the units include availability of the product, the effort
required to extract the product, and the amount of the product required
for a standard project.
Trade clearly became a popular activity. The Egyptians started trading
jewelry around 3000 BC and a series of long-range trade routes emerged
in the third millennium BC, utilized by most of the major civilizations
of the day, including the Sumerians who traded between Mesopotamia and
the Indus Valley, and the Phoenicians who used the sea at ports along
the Mediterranean Sea, as far north as Britain.
All of the major civilizations in the world, since prehistoric times,
trade vast amounts of materials on a daily basis. As trade became an
increasingly established practice, certain products that were hard to
come by, such as spices and manufactured materials, were assigned
higher values.
One of the most important trades was the European Spice trade.
Important to the Age of Exploration, the trading of spices allowed
many individuals to travel to remote areas of the world.
By the sixteenth century, the concept of free trade had emerged in
Europe, with Holland as the center. Free trade was the basic practice
of trading without exposing exchange controls on the movement of goods.
Over two centuries later, in 1776, famous economist Adam Smith
published a paper exploring the nature and causes of wealth. An Inquiry
into the Nature and Causes of the Wealth of Nations put forward a lot
of information about the benefits of economic specialization and argued
that the principles of mercantilism, that the global volume of trade is
unchangeable.
The next great minds contributing to trade were David Ricardo and
Robert Torrens, all of whom showed that free trade was beneficial to
both weak and strong industries.
John Stuart Mill argued that a country with monopoly pricing power on
the international market could affect the terms of trades through
maintaining tariffs, and controlling the market.
In 12th century France there was an organization of men responsible for
managing and regulating the debts of agricultural communities across
the country on behalf of the banks. These men were actually the first
ever brokers because they were trading debts as well as negotiating
with banks to secure the needs of farmers.
In early 13th century Bruges, Flanders, Ghent, and Amsterdam were home
to numerous merchants and commodity traders. The same can be said of
13th century Venice, although this city was particularly famous for its
bankers, who began to trade in government securities, or funds. So
began the process of trading things other than products.
In the Netherlands, during the 15th and 16th century, came the
emergence of joint stock companies. These companies allowed people to
invest in the business venture, becoming shareholders; they would then
share in the profits and losses of the company, depending on the
outcome of the various ventures.
In 1602, the Dutch East India Company issued the first shares of the
Amsterdam Stock Exchange. The company was also the first to issue
stocks and bonds to a market of consumers. From these beginnings, the
formal trading centers, stock exchanges, developed and grew.
Note:
After you sign up for this package, you
will need to confirm your request to receive your free day trading
checklist report. This is done by clicking on a
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If
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The information
in this guide and on this
site should not be construed as financial advice and are for
information purposes only. The authors and publishers are not financial
advisers. You should rely on your advisers and lawyers for financial
advice.
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