The Evolution of the Share Market: From Traditional Trading to Online Share Trading Apps
The evolution of the share trading paradigm has made things more efficient for traders and investors. However, things have not always remained the same. Traders had to follow a complex series of protocols just to implement their orders. However, those phases were imperative to reach where we are now. With the evolution of technology, each issue faced by traders was addressed, and the system was simplified to make things more efficient. Each milestone achieved, from the open shout system to today's online trading, has pros and cons. In this blog, we will illuminate the evolution of the trading system and its significance.
Published on 19 August 2024
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Open Shout System
Before the era of electronic screens and algorithms, the trading floor buzzed with a unique kind of energy. This was the domain of open outcry trading, a chaotic yet vibrant system where orders were communicated through shouts and hand signals.
Imagine a bustling pit, a circular area on the exchange floor, where traders representing different brokerage firms gathered. Each instrument being traded, like stocks or futures contracts, had its designated pit. To buy or sell, traders would shout out their bids (offers to purchase) and offers (requests to sell) along with the quantity they desired.
Hand signals accompanied the shouts, adding another layer of communication. These hand gestures represented specific prices and quantities, ensuring clarity amidst the din. Experienced traders could decipher the complex dance of voices and gestures with impressive speed and accuracy.
The open outcry system had its advantages. It fostered a sense of community and immediate price discovery. Buyers and sellers could directly interact, potentially leading to better deals. However, it also had limitations. The noise could be overwhelming, leading to errors or missed opportunities. Limited space in the pit restricted participation, and transparency could be compromised by the fast-paced environment.
With the rise of technology in the 1980s and 1990s, electronic trading platforms emerged. These digital systems offered faster execution, greater transparency, and wider participation. Open outcry trading gradually declined, and today it's a relic of the past, preserved only in a handful of exchanges for specific contracts. While open outcry might seem like a bygone era, it serves as a reminder of the ingenuity and human element that once dominated the financial world.
Telephonic Trading
The open outcry system, with its cacophony of shouts and hand signals, brought a certain drama to the world of finance. However, its limitations like noise, space constraints, and potential for human error paved the way for a quieter, yet crucial, intermediary telephonic trading.
Telephonic trading emerged in the latter half of the 20th century as a bridge between the fading open outcry system and the burgeoning era of electronic trading. After the open outcry pits started to quiet down, traders relied on telephones to communicate orders directly with brokers on the exchange floor.
This system offered several advantages over open outcry. Firstly, it eliminated the physical limitations of the pit. Brokers could now represent clients from anywhere with a phone line, increasing market participation. Secondly, the noise and potential for confusion were significantly reduced, leading to more accurate order placement.
However, telephonic trading wasn't without its drawbacks. The process was still manual, requiring brokers to relay orders verbally, which could be time-consuming. Additionally, the reliance on human communication left room for errors and delays, especially during periods of high trading volume.
Despite its limitations, telephonic trading played a crucial role in facilitating the transition from the open outcry system to electronic trading. It provided a more efficient and controlled environment for order execution, paving the way for the faster, more automated systems we rely on today.
The rise of electronic trading platforms in the late 20th century eventually rendered telephonic trading obsolete. These digital systems offered even greater speed, accuracy, and transparency, handling order execution in milliseconds. Today, while some brokers might still accept phone orders in specific situations, the vast majority of trading activity happens electronically.
Telephonic trading may be a relic of the past, but its legacy remains. It bridged the gap between the bustling pits of open outcry and the quiet efficiency of electronic trading, playing a vital role in the evolution of the financial markets.
Online Trading Panels
Today, a share trading app is equipped to process the orders placed by traders and investors within microseconds. It has removed the latency involved in seeing an opportunity, consulting your broker, and further order placement. With the same, things have become more efficient for traders, enabling them to navigate the market without additional trouble. However, the rise of online share market app has made the market hypercompetitive and has led to new complications.
Concluding Remarks
Before the rise of online share trading app, the paradigm involved two distinct systems namely open shout and telephonic trading. Each had its limitations that have been addressed by the best online share trading app.
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Diwali, the festival of lights, is one of the most prominent Indian festivals. It marks the beginning of the Hindu accounting year called Samvat. Most people consider Diwali an auspicious occasion to make financial investments because of the blessings of Goddess Laxmi.
A ticker tape has a long and enriched history dating back to the nineteenth century. Providing investors with knowledge about the trades and prices is crucial, helping them make informed decisions. A ticker tape is a printed paper ribbon that provides traders with numeric data and stock symbols.
How to Use Technical Analysis for Intraday Trading?
Technical analysis enables traders to make rational trading decisions and provides them with insights to understand the appropriate time to jump on the bandwagon. Technical analysis is one of the time-tested methods to make market anticipation. Trading in the market is challenging, and traders often face dilemmas and bouts of indecision.
Diwali, the festival of lights, is one of the most prominent Indian festivals. It marks the beginning of the Hindu accounting year called Samvat. Most people consider Diwali an auspicious occasion to make financial investments because of the blessings of Goddess Laxmi.
A ticker tape has a long and enriched history dating back to the nineteenth century. Providing investors with knowledge about the trades and prices is crucial, helping them make informed decisions. A ticker tape is a printed paper ribbon that provides traders with numeric data and stock symbols.
How to Use Technical Analysis for Intraday Trading?
Technical analysis enables traders to make rational trading decisions and provides them with insights to understand the appropriate time to jump on the bandwagon. Technical analysis is one of the time-tested methods to make market anticipation. Trading in the market is challenging, and traders often face dilemmas and bouts of indecision.
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