Stock Market
Stocks are most often traded through a regulated market called a stock exchange. Once upon a time, these exchanges were actual locations where traders and brokers gathered to negotiate prices. The New York Stock Exchange still meets every weekday in this style, but the major worldwide trend has moved towards electronic trading. Trades are still regulated by their respective governing bodies; bids and offers are merely placed and agreed upon virtually rather than shouted out. Proponents of the electronic movement claim that this makes the market more efficient. Not all brokers agree with this, though. For larger trades, voice transactions, known as the “upstairs trade,” are still the preferred method for some. These trades are more sensitive since they deal with larger amounts of money. Debate and a personal touch are often necessary to find a price that both parties will agree upon.
Stocks do not necessarily need to be traded via an exchange. It is much easier however, for a company to put shares up for offer in these venues since it makes purchase of shares more publicly accessible. Stock sold independently of an exchange is known as an over-the-counter transaction, a concept closely related to the OTC Forex Spot market since both are unregulated. This can be done directly between a company and an individual or between two individual traders. The OTC market is also utilized by businesses that do not meet the requirements of a specific stock exchange.
The basic goal of the stock market is to promote business. By purchasing shares of a publicly owned business, investors are helping their selected business expand its potential output. More money than would normally be available is pumped into a company, giving that company the opportunity to expand at a greater rate. Investing is not a one way street, though. Rather than having saved dollars sit in low-interest bearing accounts, investors are given the opportunity to share in the profits by helping finance corporate expansion. This is a much greater risk than the guaranteed profits of a certificate of deposit or savings account, but the rewards for successful trading are far greater.
Stock exchanges also act as a simple way to gauge the economic health of a nation. If the majority of stock indices are on the rise, the nation has little to worry about. If, however, companies show a consistent loss over an extended period of time, this is an indicator to the government that it must somehow restore prosperity. Whether this means a change in interest rates, a change in the money supply, or some other measure, is up to the discretion of the government.
For more infomation on The Stock Market choose from the list below. |
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Banking - Business Finances - Economics - Insurance - Investing
Major Purchases - Personal Finances - Stock Market - Taxes
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