Thousands of people who have money saved for retirement in any kind of account can be thought of as taking part in the Stock market. But have you ever thought about how this interesting market actually works? Imagine you were at a regular auction, but instead of nice things like cars and antiques, pieces of public companies were being bid on.
Think about what an auctioneer does to make the comparison less hard to understand. The job of the auctioneer is to get the best price for each item. Well, the way stock exchanges around the world work is kind of the same. The person who acts as an auctioneer is called a Market Maker. In a stock sale, there is no fixed price. Instead, it is the job of the Market Maker to set the price.
The price will change a lot because buyers and sellers, the ying and yang of the market, will bet on either the stock going down or up. When a stock's price goes up, it usually means that the price to buy that stock has gone up. When the value of a stock goes down, it's the other way around.
Now, I'm sure you've seen pictures of a stock floor on the major news networks. You know, the floor where a lot of people who are completely crazy scream numbers, look at screens, and make trades all day. The trading day begins at 9:30 a.m. Eastern Time (ET) and ends at 4:00 p.m. Easter Time (ET). How much volume a market can have in a day depends on business news, market predictions, world events, and a few other things.
In the last couple of paragraphs, all the details of the New York Stock Exchange (NYSE) and the less well-known American Stock Exchange have been talked about. But there is also a third! The name of it is NASDAQ.
Now, NASDAQ is very different from the other two markets because it is run by computers. Even though this stock market has become more technologically advanced, it still has the traditional bidding water of NYSE and American Stock Exchange. The buyers and sellers each have their own areas where they can buy and sell stocks and bid using a system called Level II.
The great thing about trading stocks is that you don't have to be in the pit bidding like a madman on the hunt for his life to be successful. In no way! You can now trade stocks on your home computer or, if you live in a big city, at a trading office. There are a lot of different online brokerages that can help you get started on your way to becoming a great stock trader.
PROFIT ON!
