What's what in finances: Trade What's what in finances: Trade

What's what in finances: Trade

The voluntary exchange of goods and/or services for money or an equivalent good or service. Trade is regulated by the laws of the particular jurisdiction in which a trade is made. Common restrictions include prohibitions on selling stolen property or non-existent goods. Most states, however, have much more complex regulations for trade, depending on the complexity of goods and services traded in their jurisdiction. States also regulate trade between parties in different jurisdictions.

Trade exists because of the division of labor, specialization and different funding sources. Since most people focus on one small aspect of production, they need to trade with others to acquire goods and services different from those they produce. Trade exists between different regions mainly because of different conditions in each region, some regions may have a comparative advantage over a product, promoting its sale to other regions.

In modern finance, trade especially refers to trade on securities exchanges. For example, the sale of a stock from one investor to another is known as a trade. And in developed economies, trades are usually made by an intermediary, especially money or credit. 

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