What is an exchange

The first stock exchanges appeared in Ancient Rome (2nd century BC), when traders began to conclude agreements on purchase and sale of goods without physical presence at the place of trading. In the early 15th century, in the Belgian city of Bruges, the Van der Burset family founded the first exchange, which was similar to the modern one by its work scheme. In 1409, in the house of the family held meetings, which brought together merchants from all over Europe. They negotiated, concluded trade deals, and used promissory notes as guarantees of obligations fulfillment.  

The first official exchange opened in the Belgian city of Antwerp. Originally it was a small marketplace, where merchants concluded bargains on purchase/sale of goods. In 1531, the first building of the Antwerp stock exchange opened, where it was possible to buy not only goods, but also bonds. In the 1580s the city of Antwerp was destroyed, but exchange trade continued in the Netherlands, where such a financial instrument as stocks first appeared. The East India Company and the West India Company were the first companies to list their shares on the stock exchange.

In 1637 the Dutch economy collapsed, and the London Stock Exchange (LSE) became world-famous, which is still in operation today.

What is the stock exchange in the modern world?

In the 21st century it’s a trading platform where sellers and buyers gather to sell or buy securities, currency, cryptocurrency or commodities such as gold, oil, etc. In the last decade, trading has moved to electronic exchanges, thanks to which the physical presence of participants in the exchange building is not required.

The exchange organizes trading, establishes and regulates trading rules, eliminates and solves conflicts between parties, and develops contracts.

Their members earn profits by conducting trades, and the exchange earns commissions from each concluded transaction. The general principle of the exchange operation is to bring together the seller of goods with the buyer, guarantee their security in carrying out transactions and obtain a commission for this.

Exchanges differ from each other by the asset they trade. There are three most common types of exchanges: stock exchange, currency exchange, and cryptocurrency exchange.

Marketplace for attracting investment where companies place their securities: stocks, bonds and other financial instruments. To enter the stock exchange, companies hold an IPO (initial public offering) — initial public offering or SPO (second public offering) to attract investment. Trading on the stock exchange regulates the securities market and ensures liquidity of financial investments.

For the investor, the stock exchange is a place where he can invest money in securities and receive income through dividends (part of the company’s profits) or make money on the difference in the price of assets.

Let us study the main advantages of the fundamental analysis.

The largest stock exchanges are New York, London, and Tokyo. There you can buy stocks of famous corporations, which make up three-quarters of the world’s financial capital. 

Currency Exchange

This is a part of the international foreign exchange market infrastructure. The main task of the currency exchange is setting and regulating exchange rates of national and foreign currencies, depending on supply and demand. At the currency exchange, transactions are made for the free sale and purchase of currencies on the basis of quotations.

You should not mix up the currency exchange concept with the over-the-counter Forex international market. The main purpose of Forex is to make a profit due to changes in the exchange rate of currency pairs. In Forex, an investor invests in a currency and sells it when its price goes up. This way he makes a profit.

Cryptocurrency exchange

Relatively new trading platforms that are increasingly in demand, due to the growing popularity of cryptocurrencies. Cryptocurrency exchanges are electronic platforms where users can buy, sell or exchange cryptocurrency for another digital asset or fiat (regular currency: euro, dollar, etc.).

Any user can register at the cryptocurrency exchange, but it will be necessary to pass the procedure of identity verification. To do this, the user sends his photo and passport data.

Cryptocurrency exchanges earn on commissions from user transactions and withdrawals. For users, the main source of income on cryptocurrency exchanges is the high volatility of the rate, which allows them to quickly make money on the differences in the price of assets. Daily fluctuations in exchange rates can be 10 percent or more, opening up great opportunities for traders.

In addition, investors can make money on holding (long-term investing in cryptocurrency) — buying an asset and holding it for a long time. That is, you have a minimum of transactions, you do not overpay for commissions, and you can earn on long-term investing.

The main advantage of passive investing is minimizing losses. Since you don’t trade, but rather store cryptocurrency, you don’t worry about sharp ups and downs in exchange rates. If you “forget” about investments for a year or more, you can get profit in the region of 20-30% per annum or even more. For example, in April 2020 Ether was worth $136, and in April 2021 its price rose to $2213. The total growth is 614%.

Another way to passively invest in cryptocurrency is staking. This is the storage of coins in a blockchain. It can be compared to a deposit in a bank — you keep assets and get profit for it.

Which is the most profitable?

The answer to this question depends on the goals and desires of the investor. If you want to invest in shares of a company and take part in its management, you will need a stock exchange and a broker, because you can’t buy securities directly from the stock exchange.

If you are interested in cryptocurrencies, you should go to a cryptocurrency exchange and choose a trading strategy for yourself. In case the high volatility of the cryptocurrency market scares you, but buying stocks does not inspire you either, a currency exchange or over-the-counter Forex market is the best option.

In the S-Group ecosystem, you can choose any investment direction. Forex Market project helps to earn on the currency market with the help of the robot with artificial intelligence, and S-IPO will help to invest in the shares of the companies which have issued an IPO. We offer a team of professional analysts who analyze the market and assess risks, as well as a personnel manager accompanying you throughout the transaction.

As we wrote above, the choice of the type of analysis depends on the investment strategy. If the investor prefers long-term investing, he should pay attention and study the basics of fundamental analysis. This type of analysis allows you to track the development of the company and the industry over the years, as well as determine the fair value of the asset.  

If the investor is more attracted to trading, intraday trading, it is essential for him to understand how technical analysis works. Because it is technical analysis that gives the necessary data for short-term investments and makes it possible to predict trends. But it should be remembered that for the qualitative interpretation of data from the chart, it is also important for an investor to know the basics of fundamental analysis.