What Is Traded: Know the Basic Forms of Exchanges

In ordinary terms, a trade happens when there is a voluntary exchange of either services or goods and even both. A complete trading process happens when two individuals or entities went on their own separate ways after exchanging commodities or services with whatever medium they have agreed on, like money or another product. A direct exchange of commodities or services without the involvement of money or currency is called barter. Historically, barter was the sole mode of trading before, but eventually, the development of other medium of exchange such as the use of money, non-physical money, and credit paved the way to a more advanced and precise method of trading. Eventually, trade variations such as futures trading were developed.




The Various Forms of Trade

There are two basic forms of trade, and these two are:



The bilateral trade or an exchange of commodities or services between two individuals or traders. An example of this process is your casual buying of things such as from a hotdog vendor. You give the hotdog vendor some dollars, he gives you your ordered hotdog and the trading cycle was completed. Bilateral trade can also be applicable in other forms of trade like futures trading.

The multilateral trade happens when more than two individuals are involved in the process such as agreements between several nations regarding trade and exchange policies. Multilateral trade is complex and is sometimes difficult to harmonize due to the involvement of several entities or countries.

Where Does Trading Happen?

Trade and trading can happen anywhere as long as there is a consented and voluntary exchange between parties, but generally, trade takes place in local and international market. A market can be physical such as your supermarkets in your area or it could be electronic or non-physical markets. Trading can also take place in transactions for the future or futures trading. A perfect example of non-physical markets can be found on the Internet and on websites that offer goods and commodities where the transfer of money happens electronically or between virtual accounts. Trade can also happen in the black market or illegal trades where commodities are passed through the backdoor of a country without proper documentation. This type of trading is illegal and financially detrimental to a country because the government cannot collect taxes from the commodities channeled through the backdoor.



What Is Traded?

Technically, anything can be traded provided there is consent from the rightful owner of the commodity. Anything can also be subjected to futures trading following the aforementioned premise. Real properties such as lands and fixed assets should have papers to support ownership and to legitimize the trading whether spot or futures trading. Trade that involves services should be voluntary and must be coupled with just compensation.



How Do You Identify a Good Trade?

The commodities and services you have paid for must be commensurate to your payment. To ensure that you are getting into a fair and legal trade, check the background of the person you are trading with or read the labels of the things you buy to know that you are buying safe and quality products or you are getting into a safe futures trading.