Loading the player...

What is a 'Trade'

Trade is a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the exchange of goods or services between parties. The most common medium of exchange for these transactions is money, but trade may also be executed with the exchange of goods or services between both parties, referred to as a barter, or payment with virtual currency, the most popular of which is bitcoin. In financial markets, trading refers to the buying and selling of securities, such as the purchase of stock on the floor of the New York Stock Exchange (NYSE).


Trade refers to transactions ranging in complexity from the exchange of baseball cards between collectors to multinational policies setting protocols for imports and exports between countries. Regardless of the complexity of the transaction, trading is facilitated through three primary types of exchanges. Trades are executed with the payment of sovereign currency, the exchange of goods and services, or payment with a virtual currency.

Currency as a Medium of Exchange

Money, which also functions as a unit of account and a store of value, is the most common medium of exchange, providing a variety of methods for fund transfers between buyers and sellers, including cash, ACH transfers, credit cards and wired funds. Money’s attribute as a store of value also provides assurance that funds received by sellers as payment for goods or services can be used to make purchases of equivalent value in the future.

Barter Transactions

Cashless trades involving the exchange of goods or services between parties are referred to as barter transactions. While barter is often associated with primitive or undeveloped societies, these transactions are also used by large corporations and individuals as a means of gaining goods in exchange for excess, underutilized or unwanted assets. For example, in the 1970s, PepsiCo Inc. set up a barter agreement with the Russian government to trade cola syrup for Stolichnaya vodka. In 1990, the deal was expanded to $3 billion dollars and included 10 Russian-built ships, which PepsiCo leased or sold in the years following the agreement.

Virtual Currencies

As the newest medium of exchange, virtual currencies do not expose holders to foreign exchange risks, provide anonymity between trading partners if desired and avoid the often-significant processing fee for credit cards. The most popular virtual currency is bitcoin, which was introduced in 2009. Bitcoins are held in virtual wallets and can be used with a growing number of merchants, including WordPress.com and Overstock.com. The virtual currency is also popular with small businesses, due in part to the lack of processing fees.

  1. Bitcoin Exchange

    A bitcoin exchange is a digital marketplace where traders can ...
  2. Market

    A medium allowing buyers and sellers of a specific good or service ...
  3. Spot Exchange Rate

    A spot exchange rate is the rate of a foreign-exchange contract ...
  4. Countertrade

    Countertrade represents international trade activity whereby ...
  5. Free Right Of Exchange

    An investor's right to transfer an asset to another party without ...
  6. International Currency Exchange ...

    An international currency exchange rate is the rate at which ...
Related Articles
  1. Tech

    Do Cryptocurrencies Have Intrinsic Value? It Depends

    Cryptocurrencies matter in the long run, whether as a store of value or a medium of exchange.
  2. Tech

    The History Of Money: From Barter To Banknotes

    Money has been a part of human history for at least 3,000 years. Learn how it evolved.
  3. Tech

    Japan May Abolish the 8% Sales Tax on Bitcoin

    Japan is finally looking to drop tax levied on the virtual currency, which would trim the costs for buyers as well as relieve exchanges from the administrative burden related to taxation.
  4. Tech

    Why Governments Are Afraid Of Bitcoin

    Bitcoin is the first decentralized peer-to-peer payment network and cryptocurrency. Governments may fear Bitcoin because its value is determined by users and not central governments or banks. ...
  5. Investing

    Who Owns The Stock Exchanges?

    As M&A heats up among the exchanges, here's how the market currently looks.
  6. Tech

    What Is Bitcoin's Intrinsic Value?

    What would bitcoin's price look like in the event of widespread adoption?
  7. Tech

    How Much Cheaper are Bitcoin Fees than Credit Card Fees?

    Bitcoin transaction fees are starting to rise as the network gets backlogged due to more usage, but are still much lower than typical credit card fees.
  8. Tech

    5 Live Bitcoin Exchanges

    Learn about five of the largest bitcoin exchanges operating around the world in 2015, and discover the issues these exchanges are facing.
  9. Trading

    Traveling Abroad? Get the Best Exchange Rates

    When you exchange currencies, here’s how to make sure you are getting top value on the trade.
  10. Tech

    Bitcoin's Price History

    Read about the volatility in the price of Bitcoin. Learn how the currency has seen major spikes and crashes, as well as differences in prices across exchanges.
  1. What are some examples of barter transactions?

    Learn how bartering involves the provision of goods or services in exchange for other goods or services, and review different ... Read Answer >>
  2. What does the IRS say about what constitutes taxable income?

    Find out what the Internal Revenue Service, or IRS, considers to be taxable income and nontaxable income, including value ... Read Answer >>
  3. Who uses bills of exchange?

    Find out who uses bills of exchange, why they are important in international trade and what happens when a bill is traded ... Read Answer >>
  4. Why are traders on the floor of the exchange?

    Before the advent of electronic trading platforms, the floor of the stock exchange was the location for market transactions ... Read Answer >>
  5. Where on the Internet can I find free sample templates for a bill of exchange?

    Understand the concept behind a bill of exchange, and learn about websites on the Internet where you can find free sample ... Read Answer >>
  6. What is the difference between a bill of exchange and a promissory note?

    Learn what bills of exchange and promissory notes are, along with notation of the primary differences between these two documents. Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center