Want to Get Rich Trading? Learn How It's Evolved
Making money through trading: a history
The following article is a guest post and may contain affiliate links:
A lot of people don’t seem to think that trading has changed all that much over the years. But it’s important to understand the extent to which it has. People still get caught up by the get-rich-quick vibes that stem from days that were more golden. A key to success in this pursuit is to really understand how its workings have changed over the years.
Trading back in the day
In order to see just how much trading has changed over the years, you don’t actually have to go back that far. Sure, we could take you back to the 20s, but who here was trading back then? We could go back to the 70s, but that wouldn’t display just how quickly things have changed. All we have to do is go back to the late eighties and early nineties. If you have ever seen the film The Wolf of Wall Street, then you know the era that I’m talking about.
Anyone with a slight interest in trading will have seen a lot of familiar points in that film. But they would also have noticed an even bigger array of differences. While it’s a ridiculous and dramatic movie, it actually depicts a lot of truth about trading during that era. Did you notice that everyone in that film is constantly on the phone? Well, that’s how someone used to buy and trade stocks. They had to work with a broker and call them in order to arrange certain deals and transactions.
And, of course, the abundance of those brokers is another thing that sets previous eras apart from ours. They were a necessary middleman between a budding trader and the transaction itself. While trade brokers are still largely in business, people can work much more independently of them now.
There’s also the blatant corruption on display to consider. But we’ll get to that soon enough.
Advancing technology and its availability
Computers have been in use in trading for decades. But it used to be that the brokers were the ones using the computer. The traders would have very limited access to that sort of technology. But now, computers are ubiquitous. And they’re the key instrument when it comes to modern trading. These days, you don’t need a broker. (Though those who aren’t confidently in the know may still need one.) These days, what you need is a computer and an Internet connection. That’s about it.
Of course, smartphones have also brought about massive changes. The flexibility of your average trader has now increased monumentally. This actually highlights a certain “untruth” in the previous paragraph. As long as someone has the right software on their smartphone, they don’t even need a computer! This flexibility has led to an increase in everyday people pursuing trading as a full-time endeavor. But it’s also brought about a more casual attitude to the whole thing for some people. Trading can become a fun pastime. What used to be an intense, long-term commitment can now simply be a way to pass time while on long journeys.
“Software” is a very important term when we consider how trading has evolved. These days, when people talk about “brokers”, they may actually just be referring to software instead of an actual person. The right software has actually become the most popular way to get into pursuits like forex trading. Software helps you keep track of price changes and other activity in a much simpler fashion. By collating all that information in such a way the barrier of entry becomes lowered. Speaking of information...
A wealth of information
Success in this industry has always relied heavily upon information. Such information wasn’t always easy to get your hands on. Consider how easy it is to check out the performance of any given company via a simple Google search. All you need to do is type in the right three letters into a search field and bam, you’ve got the stock info. But budding traders back in the day wouldn’t have had such easy access to information. They would have had to rely on hearsay, as well as the advice of their brokers. (Who didn’t always have their best interest in mind.)
Newspapers would have been their most reliable source of business information. Of course, newspapers are pretty static sources of information. If something drastically changed midday, how were they to have known? (Unless they had their ears glued permanently to certain financial radio stations?)
You need to stay abreast of so many things in order to work out a good deal from a bad one. Thankfully, the Internet has made this so much easier. What seems like the smallest piece of news could end up having huge effects on the stock market. And with the world wide web, you can see how everything plays out in real time.
Tidying up the act
Of course, the increase in the availability of such information has led to something of a clean-up in the trading business. While trading in and of itself hasn’t been a shady business, the people behind the scenes were known to have been shady. (The real Jordan Belfort has stated that The Wolf of Wall Street actually barely scratches the surface of the depravity he saw in the industry!) But these days, it’s much easier for people to see shady tactics
But this is balanced somewhat by the fact that the risk of trader fraud has actually increased with the Internet. This goes for pretty much any type of fraud. You’re sharing sensitive payment information over the Internet, after all. In doing so, you’re exposing yourself to a lot of risk. Even the most casual trader needs to look into online security to keep their assets protected.
One of the most important things to remember is that trading has been becoming increasingly volatile over the years. It’s been hard for analysts to say definitely that technological advances have caused this. Certainly the crash of 1987 has been attributed, in part, to an increase in program trading by computers. (Basically, people became so excited over the increasing ease of trade that things went very wrong.)
Volatility these days is attributed more to an increase in micromanaging. Because information is disseminated so rapidly, prices change all the time. While there was always frequent business movement in the past, people didn’t find out about it quite so quickly. When you consider it in this way, it becomes clear that increased volatility is partly due to the advance of the Internet.