If you watch TV, especially American channels, you will probably see that the stock market is often the subject of discussion. Politicians and businessmen often argue that the country’s economy is highly dependent on financial institutions. Moreover, it is also said that the stock exchange reflects the economic situation of the country.
You will also notice that for a long time a number of smartphones, such as the iPhone, were sold with the pre-installed Stocks app. To the naked eye, a similar app simply has company names written on it and green or red numbers indicating an increase or decrease in stock price.
The stock market can be said to have been created by chance in the 17th century. Today it is available to everyone, you can buy shares of different companies, such as Google or Amazon, without leaving home. While in its time access to the shares of companies was not so easy.
In his time, separate companies were created, whose agents invested their capital in different companies, ie bought shares of other companies in order to sell them at a higher price later. People who did this were called stockbrokers or just brokers.
Today, much of the stock trading is largely automated. That is, instead of an agent calling a company and telling them that it is buying or selling a certain number of shares, it does so with High Frequency Trading (HFT) algorithms. Which ensures much faster buy-sell of shares.
The transfer of much of the trading to algorithms began with the refinement of technology, and the result is that the stock market is much more sensitive. That is, the stock price of companies can change much faster. According to one study, more than 80% of FOREX market trades are conducted using HFT algorithms.
How does algorithmic trading work and what does it mean for stock exchanges as well as the global economy? These are the issues we will discuss in this article.
In the 1600s, maritime trade was a very important part of the economy. The Industrial Revolution had not yet begun, hence the dominant economic system was mercantilism. The preferred merchant ships of the kingdoms were linen, wool, gold, and silk.
In addition to the kingdom, trading companies also had nobles who hired sailors and merchants. Over time, trade became relatively more commercial and traders sought sources of funding. The merchants offered the nobles a share of the profits made in return for the investment.
That is, one person would allocate money to the crew, which would result in a share of the profits from the traded products, while another would fund the infrastructure and share it as well. This is one of the simplest examples of stock trading. Large investors could contribute to the operation of the merchant ship, for example, those who financed the infrastructure could select building materials, and so on.
One of the first formal stock exchanges was made in Amsterdam, where people could buy shares of various companies. A stock is, in effect, a share of a company whose price depends on the success of the company and the demand for shares.
There are many and varied stock exchanges, there are local and international exchanges, there are banking and currency exchanges, etc.