From Coffee Shops to Crypto Bots: The History of Popular Trading Methods and Strategies

Friday May 15, 2020

The idea of trading has captured the imagination of humans almost since time began. As methods of trading have become more sophisticated, we have looked for new ways to take advantage of the latest technology to make a profit from our investments.

To understand how trading has evolved in line with technology, we can look at some strategies that are currently used and then compare them to how things used to be.

21st Century – Bots and Copy Trading

There are some good examples of modern trading strategies that only came into existence fairly recently. These are approaches that let us use the power of new technology to trade swiftly and with a wealth of information to help us make good decisions.

Artificial intelligence has led to the use of crypto robots that can execute trades independently. An example is Libra Method, which collects crypto data, identifies trades in real-time, and automates trades, according to the review on Coinlist. Similar tools are used in other markets, such as stocks and forex.

Among the other main changes, we have seen the rise of copy trading. This is a form of social trading in which you copy the investments made by a respected trader on the same site or community, leading to the same profits or losses on both sides.

Overall, as technology has improved and the blockchain has appeared, trading has moved online. This has led to the above new strategies and tools emerging. While this has been clearly seen in crypto trading, it has also changed the way that people trade in markets such as forex, stocks, and commodities.

How did the original trading markets change over the centuries to give us this way of buying and selling?

The First Stock Exchanges – Short Selling and Safe Havens

While the trading of objects has been around since prehistoric times, to understand the history of financial trading, we need to start with the first stock markets. Coffee shops were where many transactions were carried in the early days, with hand-written certificates changing hands.

The first stock exchange was in Amsterdam, Holland and the Dutch East India Company was the first company listed on it. This happened at the start of the 17th century and the method of buying and selling stock certificates introduced here would be the basis of stock markets for centuries to come.

Traders now worked in their own building, with new exchanges popping up all over the world. However, they still largely relied on the physical paper certificates that confirmed each investment. Tactics such as short selling appeared early on, although the Dutch authorities were quick to ban it.

Precious metals have always been sought after too, and the introduction of the gold standard in the 1930s meant that it was confirmed as the most popular safe haven. This gave investors a strategy for diversifying and for seeking refuge from volatile markets in times of economic turmoil.

The Introduction of Technology – Leveraging and Scalping

The increasingly complex world of stock markets saw telegraph wires and then computers introduced in the 20th century. This gave traders a greater overall view of the market and allowed them to spot trends and move more quickly than before.

Trading became a big business with the booming days of the roaring 1920s in Wall Street and then the crash of 1929 epitomizing the volatility of the stock market.  Part of the reason for this crash was that many investors had over-leveraged, borrowing large sums of money to buy stock on the basis that prices were going to carry on climbing indefinitely.

The introduction of computers meant that traders could now become fully informed and invest efficiently, based on the trends that they had seen and rapidly analyzed. Strategies like scalping also become popular as technology advanced, as the short timeframe needed to carry out transactions allowed them to take advantage of small movements in the market to make a profit.

As technology continues to improve and offer us new ways of trading, it is likely that more new strategies are implemented by smart traders who are looking to gain any advantage that they can.