Foundations

Trading itself is older than any exchange, older than money in most tellings, wherever two people looked at what the other was holding and decided a swap made sense for both of them. What people usually mean by “the history of trading” is really the story of when that swapping got formal, and that’s a more recent and better-documented one. Where it started The Amsterdam Stock Exchange, founded in 1602 to trade shares in the Dutch East India Company, is usually credited as the first genuine stock exchange, and it set a template that every exchange since has followed in some form: a fixed place to trade, shares that could be bought and sold by anyone, and prices posted publicly for everyone to see. ...

History of Trading covers the pit era and the limits it eventually ran into. This is what replaced it, and the change happened in stages rather than overnight. The first electronic markets NASDAQ launched in 1971 as the first electronic stock market, and there was no floor to picture at all, just a network of dealers quoting prices on screens hundreds of miles apart. Other exchanges resisted for decades, because a lot of money and status was tied up in owning a physical seat on a traditional floor, but the advantages of electronic matching, speed, lower cost, and the ability to trade from anywhere, eventually made the pit model impossible to defend commercially. ...

A market isn’t a building or a website, even though it’s often described as one. Strip away the exchange, the platform, the order book, and what’s left is just a mechanism for bringing buyers and sellers together so a price can be agreed, with everything else built on top purely to make that happen faster and more reliably. Where price comes from Price is the point where a buyer and a seller agree, and it moves because that agreement point keeps shifting underneath everyone’s feet. If more people want to buy GER40 at a given price than want to sell at it, the price has to rise before enough sellers show up to match them, and if more people want to sell than buy, it falls until buyers are tempted back in. Nobody sets the price directly; it’s the running result of that constant negotiation between everyone participating at once. ...

Nobody controls a market the way a hand controls a wheel, but a small number of participants lean on it far harder than everyone else combined, and knowing who they are beats assuming price just wanders around at random. A small number of central banks at the top, down to the many retail traders at the bottom, fewer participants with outsized influence, versus many with individually small influence. ...

Every market runs on the same basic mechanism, buyers and sellers agreeing on a price, but what’s actually being traded, and who’s showing up to trade it, differs enough between market types that it pays to know the main ones before picking where to focus. Forex Currencies traded against each other: EURUSD, GBPUSD, USDJPY, and so on. Forex is the largest and most liquid market in the world by volume, it runs close to 24 hours a day across different global sessions chasing the sun around the planet, and price leans heavily on interest rate differentials and central bank policy between the two currencies in a given pair. ...

Most retail traders working with a broker like the ones covered on this site’s broker comparison tool aren’t buying the underlying asset at all, whatever the position on their screen seems to suggest. They’re trading a CFD, a contract for difference, and it pays to know exactly what that means before treating it like ownership. What a CFD is A CFD is an agreement between you and your broker to exchange the difference in an instrument’s price between opening and closing the position, and you never take delivery of the actual shares, barrels of oil, or currency involved. If GER40 rises 50 points after you buy a CFD on it, your broker pays you the cash equivalent of that move, and if it falls, you pay them, but at no point do you own any piece of the German stock market. ...

Stock exchanges and the indices built on them still keep fixed trading hours, a direct hangover from the physical floor era covered in History of Trading, even though almost everything is electronic now. Forex trades close to 24 hours a day instead, because no single exchange owns a currency, but the open and close of the major regional sessions still shape how price behaves. Why the open is different Price closes one session, then opens the next well away from that level, a gap, before continuing. ...

Forex and index trading is usually split into three broad regional sessions, Asian, London, and New York, and each has its own personality once you’ve watched it enough times: a typical volume, a typical mood, a shortlist of instruments that tend to wake up during it. Asian, London, and New York sessions (UTC). The boxed section is the London/New York overlap, the highest-volume window of the day. ...

Price movement gets measured differently depending on what’s on your chart, and mixing up the units is a quick way to badly misjudge how big a move, or a risk, actually is. A price move measured in discrete units, whether that’s pips on a forex pair or points on an index. Pips, for forex A pip is the standard unit of movement in most forex pairs, and for most pairs it sits at the fourth decimal place, so EURUSD moving from 1.0850 to 1.0860 is a 10 pip move. Yen pairs are the exception: they’re quoted with fewer decimal places, so a pip there is the second decimal, meaning USDJPY moving from 150.00 to 150.10 is also a 10 pip move even though the numbers look nothing alike. ...

A broker is the middleman standing between you and the market, and the spread, the gap between the price you buy at and the price you sell at, is the most common way that middleman gets paid for the access. What a spread is The ask (teal) sits above the bid (red). The gap between them is the spread. ...