STOCK MARKET AND FINANCIAL REVOLUTION
The stock market has evolved from early trading systems into a key pillar of global finance, influencing economic growth and investment worldwide.
The stock market has now become a vital part of the global financial system. Through this mechanism, every individual or corporation has the opportunity to own a share of a business without having to build it from scratch.
The stock market's growing role not only serves as an investment vehicle but also reflects a country's economic condition.
Therefore, economic experts often use stock market movements as a key indicator of the health of a national economy.
History shows that the stock market has gone through several important phases, from its emergence in Europe, its spread to the United States, and its transformation into a modern market.
Each phase has had a significant influence on the global economy and has shaped the way people manage their finances.
However, despite this significant influence, many novice investors experience losses due to making fundamental mistakes when investing in the stock market.
To understand why the stock market plays such a significant role in the global financial system today, it is important to trace the concept of the stock market from its inception and development.
From the funding needs of trading companies to the establishment of formal stock exchanges, the early history of the stock market laid the foundation for the financial revolution we know today.
The Emergence of the Stock Market
The idea of the stock market originated in Europe in the 1500s, or the 16th century. At that time, many large-scale companies engaged in trade were looking for a way to raise additional capital.
One such company was the Dutch East India Company (VOC), which initiated the establishment of the Amsterdam Stock Exchange in 1602.
The stock exchange became a solution for raising funds from investors through the sale of company shares.
The birth of this stock exchange gradually sparked the establishment of other stock exchanges in various countries, spreading throughout the world.
This began with 24 stock traders entering into a working agreement, the "Buttonwood Agreement," which later became known as the New York Stock Exchange.
Initially, the stock market focused solely on the sale of securities in the form of bonds and government securities. However, it continued to grow with the increase in stock trading of several leading companies.
However, in 1837, a monetary storm hit the American stock market due to the excessive speculation of several traders.
The proliferation of various technological products as a result of the industrial revolution also influenced the development of the global stock exchange.
Electronic systems became a luxury facility that played a major role in every stock transaction. The Nasdaq system pioneered the application of this electronic system to stock trading in the 1970s.
Continuing in the 1990s, the rapid development of internet technology at that time also changed the working patterns of the stock market.
Capital owners could now access the stock market more easily through an online platform. This situation triggered a surge in the number of investors entering the stock market business.
Although their businesses were still in their infancy, many company owners also joined in selling their shares on the stock exchange.
Through the public offering mechanism, a large company can offer its shares to the public. The goal is to increase its business coffers for free, without the usual interest burdens associated with borrowing from commercial banks.
From the perspective of macroeconomic experts, the aggregate stock market is one of the benchmarks for a country's economic health.
For example, on the Indonesian stock exchange, the Jakarta Composite Index (JCI) is a focal point for economists to assess the performance of the national economy.
A sharp rise or fall in the Jakarta Composite Index reflects the level of investor confidence.
One such company was the Dutch East India Company (VOC), which initiated the establishment of the Amsterdam Stock Exchange in 1602.
The stock exchange became a solution for raising funds from investors through the sale of company shares.
The birth of this stock exchange gradually sparked the establishment of other stock exchanges in various countries, spreading throughout the world.
The United States Stock Market
Two centuries after the founding of the Amsterdam Stock Exchange, in the 18th century, or more precisely in 1792, a stock market began to emerge in the United States.This began with 24 stock traders entering into a working agreement, the "Buttonwood Agreement," which later became known as the New York Stock Exchange.
Initially, the stock market focused solely on the sale of securities in the form of bonds and government securities. However, it continued to grow with the increase in stock trading of several leading companies.
However, in 1837, a monetary storm hit the American stock market due to the excessive speculation of several traders.
The Establishment of the Modern Stock Market
The birth of the modern stock market was actually influenced by the development of computer technology.The proliferation of various technological products as a result of the industrial revolution also influenced the development of the global stock exchange.
Electronic systems became a luxury facility that played a major role in every stock transaction. The Nasdaq system pioneered the application of this electronic system to stock trading in the 1970s.
Continuing in the 1990s, the rapid development of internet technology at that time also changed the working patterns of the stock market.
Capital owners could now access the stock market more easily through an online platform. This situation triggered a surge in the number of investors entering the stock market business.
Although their businesses were still in their infancy, many company owners also joined in selling their shares on the stock exchange.
The Stock Market Influences the Global Economy
The stock market has become the most iconic platform for capital owners to invest. Without the hassle of establishing their own company, an investor can become a shareholder in a corporate venture.Through the public offering mechanism, a large company can offer its shares to the public. The goal is to increase its business coffers for free, without the usual interest burdens associated with borrowing from commercial banks.
From the perspective of macroeconomic experts, the aggregate stock market is one of the benchmarks for a country's economic health.
For example, on the Indonesian stock exchange, the Jakarta Composite Index (JCI) is a focal point for economists to assess the performance of the national economy.
A sharp rise or fall in the Jakarta Composite Index reflects the level of investor confidence.
In practice, stock index fluctuations often trigger panic among novice investors. They are simply not used to dealing with the fluctuations in stock prices.
Therefore, novice investors need mental guidance so they can survive in stock trading transactions.
Monetary Crisis and the Stock Market
Throughout global history, the stock market has experienced several monetary crises, each with devastating impacts.
One example is the Great Depression of 1929, which also recurred in 2008. The cause was the collapse of the United States banking sector.
Crisis conditions like this often become a mental test, where many investors find it difficult to withstand the psychological pressure of the stock market.
These various monetary events demonstrated the stock market's resistance to economic change and imprudent monetary policy.
However, the global stock market ultimately recovered and even recorded its highest levels in recent decades.
Therefore, in addition to understanding the history and role of the stock market, novice investors also need to implement a realistic strategy. This strategy will enable them to survive and thrive in the long term.
Conclusion
The stock market is a model of financial revolution that began with small-scale stock trading in the Netherlands and then spread throughout the world.The stock market is a method capable of driving a country's economic growth. Although, throughout its development, it has experienced various crises that have affected global financial stability.
Along with the rapid development of internet technology, the modern stock market is now digitally based. Various service features for online stock trading are available. For example, fxpro trading as I have reviewed in another article.
This approach is becoming increasingly relevant for novice investors who start investing with limited capital.
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