Go Stock Trade . com Primer: What is the stock market all about?

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Thousands of people who have money in any type of account for their retirement can consider ourselves participating in the Stock market. But have you pondered about the functionality of how this interesting market works? Imagine being at a regular auction, where instead of nice bits such as cars and antiques are being bidded away, think of bits of public companies being auctioned away.
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Thousands of people who have money in any type of account for their retirement can consider ourselves participating in the Stock market. But have you pondered about the functionality of how this interesting market works? Imagine being at a regular auction, where instead of nice bits such as cars and antiques are being bidded away, think of bits of public companies being auctioned away.

To make a less confusing analogy, think about the role of an auctioneer. The auctioneer’s role is to get the highest and best price for each product. Well, the stock exchanges around the globe kinda operate in the same fashion. The auctioneer role, is called a Market Maker. In a stock sale, there is no stable, set price for stocks, but instead, setting the price is the role of the Market Maker.

The price will fluctuate greatly, because the ying and yang of the market, the buyers and sellers, will bid on either the stock going lower, or higher. Usually when you see a stock price go up, it means that the buy price of a stock has increased. This is vice versa when a stock declines in value.

Now I am sure you have seen visuals on the major news networks of how a stock floor looks. You know, the floor where tons of stark raving mad folks, scream numbers and look at monitors and make trades all day. The trading day starts at 9:30 in the morning Eastern Time, and stops at 4:00 in the afternoon Easter Time. Depending on business news, market forecasts, world events, and a few other things thrown in between, can dictate how much volume a market can have in a day.

The last couple of paragraphs have mentioned all of the particulars of two major markets, the New York Stock Exchange(NYSE) and the lesser known American Stock Exchange. But there is a third one too! It is called NASDAQ.
Now what makes NASDAQ quite unique from the other two, is that this market is controlled by computers. Despite the technological advances of this stock market, NASDAQ still has the conventional bidding water of NYSE and American Stock Exchange. The buyers and sellers have their own areas to buy and sell stock, and bid through a quote system called Level II.

The great thing with stock trading, is that in order to be successful with trading stocks, you do not have to be in the pit, bidding like a madman on the hunt for their lives. Not at all! You can now use the very computer in your house, or go to a trading office if you live in a big city and trade stocks. Many different internet based brokerages are out there, and have plenty of materials to get you started on your way to becoming a great stocktrader!

PROFIT ON!

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The Basics On Stock Trading

The most common picture that comes to mind when people hear about stock trading is the one we see in movies where men in suits basically shout and wrestle each other in some huge New York building to bicker about money. Although to some extent, there is some truth to this image, trading in the stock market is actually a more complex concept that helps many people earn money and keep businesses alive.

The concept of trading fundamentally consists of the buying and selling of stocks among individuals or companies through brokers. Through buying a share of stock or a share of ownership in a particular company, an individual can then benefit and earn money from however the company they invested on may fair in the market.

There are two basic methods in which the stock market operates ┬ľon the exchange floor where buying and selling is done more traditionally and electronically where technology takes on the exchange game.

Trading On The Exchange Floor

The trading that occurs on the more traditional exchange floor of the New York Stock Exchange (NYSE) is basically what most of us have become accustomed to from seeing it in the movies and on television. Basically, the NYSE consists of many brokers who negotiate the deals for individuals to be able to trade stocks.

As chaotic as the stock exchange floor may seem, there is actually a common pattern that occurs among most simple trades. First, an order to buy a certain number of stocks would be negotiated through a broker. After this, the broker’s order department would forward this arrangement to their floor clerk on the exchange. The floor clerk would then inform the company’s floor traders in order to find other traders that are willing to sell the equal number of stocks from the company that is offered to be bought. After the two parties agree on a price and close the deal, the message would be forwarded back up the line, and the broker would then inform the interested buyer on the final price.

Negotiations may take a few minutes or even longer, depending on the performance of the stocks as well as the market. For more complex trades and larger orders of stocks however, there may be a more complicated process but the principles basically remain the same.

Trading Electronically

A growing trend these days however, is trading stocks electronically, which is done through advanced computerized systems. Unlike the NYSE that generally operates through the manpower of brokers, its counterpart, the National Association of Securities Dealers Automated Quotations (NASDAQ), trades stocks completely through electronic means.

These electronic markets forgo with human stockbrokers and instead make use of advanced computer networks to match buyers and sellers. And through this method, transactions are usually faster and more efficient.

Through electronic trading, investors get many benefits such as being able to get faster confirmations, as well as facilitating control by having online investing readily available through the Internet. However, brokers basically still handle the trades, as investors do not have direct access to the electronic markets.

The process that takes place in both methods however, is usually hidden from investors. Typically, if you are an investor, a call from your broker and regular reports on your stock investments would be provided for you, but you will not really get to see what is happening behind the scenes.

Through the investments that individuals make, many businesses are kept afloat and running. And in exchange for this, investors get a fair share of earnings. Stock trading may be a complex process, but at the end of the day, many people basically benefit from all of it. As a result, the whole concept becomes simple.

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