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The Stock Market

What is the stock market? The stock market is a marketplace where buyers and sellers meet. The item that is being sold is a piece of paper which represents ownership in a company. Professional stock traders see the stock market as nothing more than letters and numbers changing rapidly. My definition of a stock is four letters (in the NASDAQ stock market) followed by a number. The four letters being the ticker symbol which remains the same (it does not change unless the exchange removes it from being listed) and the number being the price per one share (unit) of that stock. The price (the number) will dynamically fluctuate during trading hours in direct relationship to … SUPPLY and DEMAND.

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The Exchange Stock Market

The Exchange Market is a place where buyers and sellers come together to trade. The best known and largest exchange is the New York Stock Exchange (NYSE). The NYSE is a large room with many trading posts where trades take place. Each post has a specialist who handles specific securities. He can act as a broker's broker and make commissions on the trades, or he can buy and sell out of his own account, hence, creating a market in that specific security. The NYSE is not directly involved in the actual transactions (trades) but acts as a police officer enforcing certain rules to ensure fairness.

The New York Stock Exchange sets the policies of rules and regulations and decides which stocks are eligible for listing, and which firms can become members of the exchange. The NYSE approves specialists as well. There are many restrictions on the specialists in order to make a fair marketplace.

Over The Counter Stock Market Trading – NASDAQ

The NASDAQ is different from the New York Stock Exchange because the NASDAQ exchange has no physical location nor trading posts. This exchange is 100% electronic and the specialist here is replaced with Market Makers (MM.) These Market Makers are individual firms willing to make a market. The Market Maker is similar to a specialist on the NYSE, but he acts as a dealer, not as a broker. In general, the Market Maker has a position in a particular stock and sells out of his own inventory. Market Makers make their money from a markup or markdown rather than from commissions. The Market Maker regularly publishes Bid and offer quotes and is ready to buy or sell the stock at the quoted prices. These quotes can be seen on a Level II screen.

Stock Investment and Stock Trading Objectives

It is important to determine your stock investment and stock trading objectives as it varies for each individual. The objectives of a married 28 year old with a newborn baby are totally different than the objectives of a 50 year old looking to retire and, of course, both are totally different than the objectives of a 23 year old who is single. It is important to define the financial responsibilities one has in order to better manage his/her money. Before you start investing in the stock market, write down your objectives and goals as an investor along with your present and future financial responsibilities.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.