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How To's of Stock Market Trading
from: Nicky PilkingtonStock is ownership in a company. Each share of stock represents
a small piece of ownership. The more shares a person holds, the
more part of the company he owns. The more part of the company a
person owns translates to more dividends he earns when the
company profits.
A stock market is a market for the trading of publicly held
company stock as well as associated financial instruments such
as stock options and stock index futures. On the other hand,
stock market trading is the buying or selling securities or
commodities specifically in the stock market.
There are two basic methods of doing stock market trading.
Traditionally, stock markets where open-outcry where trading
happened on the stock exchange floor. The more modern way of
doing stock trading is through electronic exchanges where
everything occurs online real-time.
Stock market trading via the exchange floor could not look any
more chaotic. When the stock market is open, hundreds of people
are seen rushing about, shouting and gesturing to each another
on the exchange floor. Traders are also often seen talking on
phones, keeping a close eye on the consoles and entering data
into terminals.
Online stock market trading moves the trading off the floors and
more into the networks. The electronic market employs a vast
network of computers to match buyers and sellers instead of
human brokers. While lacking the excitement of the usual stock
market exchange floor, it is faster and more efficient.
Investors frequently get an almost instant confirmation on any
trades done.
How does stock market trading work? Be it on the chaotic stock
market exchange floor or electronically, one needs to get an
investment broker first.
For traditional exchange floor trading, after asking a broker to
buy a certain number of shares at the market, the broker's order
department sends this order to the clerk on the floor. The clerk
alerts a trader who finds another trader who is willing to sell
the shares the investor requested. The two traders agree on a
price for the stocks and close the deal. Notification is sent
back the same way until the broker calls the investor to inform
him of the final price. This process may take a while depending
on the market and stocks. Days later, the investor receives the
confirmation mail.
The electronic counterpart is less complicated because the stock
buying and selling are matched by the computers in real-time.
And the investors get instant updates on what happens to his
stock trade.
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