Stocks Basics: How Stocks Trade

Most stocks are traded on exchanges, which are places where buyers and sellers meet and decide on a price. Some exchanges are physical locations where transactions are carried out on a trading floor. You've probably seen pictures of a trading floor, in which traders are frantically throwing his arms up, waving, yelling, and signaling to each other. The other type of exchange is virtual, consisting of a network of computers where the transaction is carried out electronically.

The purpose of a stock market is to facilitate the exchange of securities between buyers and sellers, reducing the risk of investment. Just imagine how difficult it would be to sell shares if you had to call around the neighborhood trying to find a buyer. Really, a stock market is nothing more than the market connect buyers and sellers of a super-sophisticated farmers ". Before we go on, we should distinguish between the primary market and the secondary market . The market is where securities are created (by means of an IPO) while, on the secondary market, the investors trading securities previously issued without the participation of the company Hanh. The secondary market is what people are referring to when talking about the stock market. It is important is to understand that the share transactions of a company not directly related to that company. The New York Stock Exchange The most prestigious exchange in the world is the New York Stock Exchange (NYSE). The "Big Board" was founded over 200 years ago in 1792 with the signing of the Buttonwood Agreement 24 stockbrokers in New York City and the merchant. Currently the NYSE, with stocks like General Electric, McDonald's, Citigroup, Coca-Cola, Gillette and Wal-Mart, is the market of choice for the largest companies in America.

The Stock Exchange of New York

NYSE is the first type of exchange (as we mentioned above), where many transactions are conducted face-to-face on a trading floor. This is also known as a listing price. Orders come in through brokerage firms are members of the exchange and flow down to the floor brokers who go to a specific spot on the floor where the stock trades. At this location, called the prayer, there is a particular person called experts whose job is to match buyers and sellers. Price is determined by using an auction method: the current price is the highest amount any buyer is willing to pay and the lowest price that someone is willing to sell. Once a trade has been made, the details are sent back to the brokerage firm, who then will inform investors placing orders. Despite the exposure of humans in the process, do not think that the NYSE is still in the Stone Age :. Computers play a huge role in the process Nasdaq second type of exchange is the virtual sort called over-the-counter (OTC) market, which is the most common Nasdaq. These markets have no venue or central floor brokers do. The transaction was carried out through a computer and telecommunications network of dealers. It used to be that the largest companies listed on NYSE only if all the other second-tier stocks traded on other exchanges. The technology boom of the 90s changed all this; Currently Nasdaq is home to many large technology companies such as Microsoft, Cisco, Intel, Dell and Oracle. This has resulted in the Nasdaq becoming a serious competitor for NYSE.

The Nasdaq market site in Times Square

On the Nasdaq brokers act as market makers for various stocks. A market makers provide continuous bid and ask prices within a prescribed percentage spread for shares for which they are appointed to make a market. They can match the buyers and sellers directly, but usually they will maintain an inventory of shares to meet the needs of investors. Other Exchanges The third largest exchange in American Stock Exchange American (AMEX). The AMEX used to be an alternative to the NYSE, but its role has since been filled by the Nasdaq. In fact, the National Association of Securities Dealers (NASD), which is the parent of Nasdaq, buy AMEX in 1998. Almost all trading on the AMEX is in small-cap stocks and derivatives . There are many stock exchanges located in just about every country in the world. The US market certainly is the largest, but they still account for only a small portion of total global investment. The two main financial centers is that London, home of the London Stock Exchange and Hong Kong, home of the Hong Kong stock market. The last place worth mentioning is the over-the-counter original message (OTCBB). Nasdaq market is an over-the-counter, but the term usually refers to small companies do not meet the listing requirements of any of the regulated markets, including the Nasdaq. The OTCBB is home to penny stocks because there is little or no regulation. This makes investing in an OTCBB stock very risky.