Stock Market Investing Basics
Stock trading can be done in many ways. One of them is through the use of the services of a broker, especially in the case of a purchase of a stock of a company that is publicly offered. Another way is to execute the trades on your own. However, you may find some difficulties if you choose this alternative. They are mostly caused by the highly regulated nature of the stock field. Additionally, companies have to abide to some rules if they are to become publicly traded. These regulations concern the licensing and registration of the company itself.
So, we recommend the use of a brokerage firm if you are to make stock trades, since they know the peculiarities of this field and will guide your way through them.
Stock exchanges are the major places where stock trades are executed. These types of markets manage to bring together buyers and sellers who are willing and able to purchase and sell securities. The NYSE (New York Stock Exchange) and the American Stock Exchange are the ones that enjoy the highest popularity among investors. However, you can trade on other stock exchanges, which are smaller in scope, but provide almost the same capabilities. This means that a company of a smaller size may be listed only in a regional stock exchange, whereas larger companies may be listed in several exchanges.
Most movies that have presented action in a stock exchange create its image as a noisy and dynamic place, where commands are executed through the use of different gestures and execute trades. This is close to reality and behind this chaos an organized system stands. In this system the rules of supply and demand govern the direction of the stock price. Additionally, buyers and sellers are matched to one another through specialists. On the other hand, the investor that gives the highest price is the one who receives the share.
Brokers represent you and act on your behalf concerning the selling and purchasing of securities.
There are different types of brokers. One of them is full service brokers, who greatly facilitate your stock trading. This is so since all you need to do is to call them and order the purchase of a particular number of shares of a stock. The full service broker executes the trade for you and makes you part of the owners of the target company.
The full service broker saves you a lot of headache since the process to the acquisition of the shares includes many actions.
First of all, after you place your order the broker sends it to the department of the firm that is responsible for orders. It in turn sends it to the clerk of the brokerage firm, who is on the floor of the exchange, where the target shares are offered. This person in turn hands the order to the firm's floor trader. The latter has the responsibility of finding a broker who offers shares of the company. They negotiate a price and after an agreement is reached the order is completed. Then a message about the executed trade goes back on the same chain until it reaches you.
The described process is typical for a traditional stock exchange. However, the work is greatly facilitated by networked computer systems. This means that the process can be greatly reduced in time if the order is executed over the Internet through the website of the brokerage firm, whose services you use.
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