How Stocks Trade

How stocks trade? How does buying and selling stock really work? Well, this is the main purpose of this article, to throw light on how stocks trade online. You will get a better understanding of how stocks trade online with these resources.

First of all, you should know the places where buyers and sellers meet to trade stocks, which are called exchanges. Some exchanges are physical locations with transactions being carried out on a trading floor. The other type of exchange is virtual, comprisesof a network of computers where trades are made online or electronically.

The purpose of a stock market exchange is to promote the buying and selling of securities between buyers and sellers. Linking buyers and sellers, a stock market helps in reducing the risks of investing.

Before we move further, it’s important to know the difference between the primary market and the secondary market. The primary market is where securities are created whereas, in the secondary market, there is no involvement of the issuing-companies. The investors trade on previously-issued securities. The trading of a company's stock does not directly involve that company.

Let us now discuss some of the important stock exchanges in the world.

The New York Stock Exchange

The New York Stock Exchange or NYSE is the most prestigious exchange in the world. Founded over 200 years ago in 1792 with the signing of the Buttonwood Agreement by 24 New York City stockbrokers and merchants, it remains the most popular choice for the largest companies. Computers are widely used in the stock trading process here along with floor brokers.

The NASDAQ

The second over-the-counter (OTC) market is the NASDAQ which is a virtual market. Having no central location or floor brokers, trading is completely done through a network of computers and dealers. Today, NASDAQ has turned into a serious competitor to the NYSE.A market maker provides continuous bid and matches up buyers and sellers directly. They also maintain an inventory of shares to meet demands of investors.

There are many more stock exchanges situated in just about every country around the world. The other two main financial centers are e London Stock Exchange, and Hong Kong Stock Exchange. Although American market represents only a fraction of total investment around the world, they remain the largest. How online stocks trade explained in this article will provide comprehensive, online investment education which can be easily implemented into your investments plans.