trading

Trading refers to the act of exchanging goods, services, or financial instruments between parties. In its broadest form, it supports price discovery, resource allocation, and risk transfer within an economy. Barter, the direct exchange of goods, predates money, but most modern trading relies on a monetary medium and formal markets.

In contemporary finance, trading occurs in organized exchanges and over-the-counter markets. Major categories include equities, fixed income, currencies, commodities, and derivatives. Participants range from individual investors to large institutions, market makers, and hedgers. Trades are executed through brokers or electronic platforms, and many markets employ rules, settlement systems, and clearinghouses to guarantee performance.

Key concepts include price discovery through supply and demand, liquidity (ease of converting assets to cash), and the bid-ask spread representing transaction costs. Arbitrage exploits price discrepancies across markets, while risk management uses hedging and diversification to limit exposure. Traders may pursue long-term investing, short-term speculation, or algorithmic strategies that rely on computer models.

Market structures differ: exchanges provide centralized matching, standardized contracts, and regulatory oversight; over-the-counter markets enable customized trades between counterparties. Regulation aims to ensure fair access, transparency, and financial stability, with oversight by governmental or supranational authorities.

Trading has evolved with technology, from open outcry to electronic trading, high-frequency trading, and automated systems, continually shaping market liquidity and pricing efficiency.