| Basics Of The Stock Market |
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| Written by Matthew Wong |
| Thursday, 06 May 2010 19:28 |
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Other than supermarket, there is another market that many people visit every day. It is the stock market. To a certain extent, both supermarket and stock market are places for buying and selling or for transactions. But, stock market is of course much more complicated than a supermarket. Without an understanding of the stock market, you are going to put your assets in dangers.
Other than supermarket, there is another market that many people visit every day. It is the stock market. To a certain extent, both supermarket and stock market are places for buying and selling or for transactions. But, stock market is of course much more complicated than a supermarket. Without an understanding of the stock market, you are going to put your assets in dangers. To study a subject, people like to drill it down into smaller categories. Likewise for the stock market, it can be categorized into primary and secondary market. The word primary here means the first. That is when a stock is firstly brought to the market and sell to investors, such market is called the primary market. More often, people are trading in the secondary market. The secondary market is the market for trading of existing listed stocks. Unlike shopping in a supermarket, you are very unlikely to buy and sell the stock by yourself. To buy or sell the stock, you need agents named dealers and brokers. The main difference between a dealer and a broker lies on the stock inventories. A dealer carries his own stock inventories. Therefore, he can buy or sell the stock at any time he wants. As broker does not carry his own stock, he can only arrange for buyers and sellers to complete a transaction. One of the largest stock exchanges in the world is NYSE. To understand how NYSE operates, we first need to understand the term "member". Members of NYSE refer to those seat owners who can buy and sell securities on the exchange floor with no commissions to be paid. Therefore, you can guess that to be a member of NYSE, you have to pay a great price. Other than what we called the seat owners, there are other kinds of members including commission brokers, specialists, floor brokers and floor traders. Commission brokers are NYSE members who execute the orders from customer for buying and selling of stock. They are responsible to get the best price for their customers. Specialists are also called market makers. They are dealers for a small number of securities on the floor. They post and ask prices for their assigned securities. Floor brokers execute orders from commission brokers. They receive a standard fee from the commission brokers in return. Finally, floor traders are independent traders that work on their own accounts. They buy and sell securities according to their own anticipation of securities price fluctuations. Have you ever seen the scene of the floor activity on TV? The real floor activity of NYSE is very much the same as what you have seen on TV. People are moving around the floor for their order flow. But, it is a bit different when we talk about the operation of Nasdaq. Due to a bigger size of Nasdaq, it is much more computerized. It is a computer network of securities dealers for trading of listed stocks. If you read about the stock page on financial newspapers, you need to know how the stock information is presented. The 52 Weeks Hi Lo means the high and low price for the last 52 weeks. DIV means annual dividend. Hi Lo and close means the high, low and closing price for the day. Finally, YLD refers to the dividend yield. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Learn more about currency investment: forex trading system |