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The Basics On Stock Trading

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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 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 a more complex concept that helps many people earn money and keep businesses alive.

The concept of stock 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 in may be fair in the market.

The Basics On Stock Trading, passive income hacks, Energizing Your Investment Portfolio

There are two basic methods in which the stock market operates on the exchange floor where buying and selling are 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. The NYSE consists of many brokers who negotiate deals for individuals to be able to trade stocks.

As chaotic as the stock exchange floor may seem, there is 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 to find other traders who are willing to sell an 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 of 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 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 which 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 human stockbrokers and instead make use of advanced computer networks to match buyers and sellers. 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 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 get to see what is happening behind the scenes.

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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 benefit from all of it. As a result, the whole concept becomes simple.

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