Stock Market And Stock Exchange Basics - More Info To Help To Help You Master Stock Trading

Stock Market And Stock Exchange Basics - More Info To Help To
Help You Master Stock Trading
By Reginald T. Hobbss

’Stock Market’ as it is used in general conversation has taken
on the meaning of both the business being conducted in
investment markets and the physical place where most of the
transactions are taking place. We can speak in broad terms about
the Market being up or down and mean the general performance of
many individual stock exchanges in the country, such as NYSE or
Nasdaq in the United States. To use more specific language for
where stocks are actually traded, the term ’Stock Exchange’ is
used.

Each company will generally trade its stock on one Exchange,
unless the company is very large and, for example, trade in
multiple countries. Each country may have several Exchanges
where different companies are listed. As long as operating hours
are obeyed, people around the world can trade in any country’s
Exchanges. Trading times are similar to, but slightly shorter
than, a regular business day. Exchanges in New York are open
from 9:30am to 4:00pm Eastern Time and other exchanges have
similar trading hours in their local time zones. Japan, India,
England, Germany, Switzerland, China, and the United States host
the major world Stock Exchanges. Notable among these big players
are the Tokyo Stock Exchange, Shanghai Stock Exchange, the
Nasdaq, the NYSE, the AMEX, the London Stock Exchange, Frankfurt
Stock Exchange, and the Bombay Stock Exchange.

Stock markets can be used as a barometer for economic health of
a country. When production is high, unemployment is low, and
inflation is low the market gains total value. This rise is a
bull market. When stock prices start falling in a bear market,
the economy is generally on a downturn. High inflation and high
unemployment are usually seen at this time.

Changes in stock prices aren’t entirely dictated by the health
of the economy. A large part has to do with investor psychology
and how it relates to changes in supply and demand. When one
stock becomes a hot commodity, other investors try to join in
and the price is driven ever higher. Conversely, if a number of
people start to sell a stock and the price drops, others will
try to sell before it drops more. This push to sell just drives
down the price faster though. These psychologically driven
market changes tend to be short lived and balance out in the
long run. It is the economic health over time that is reflected
in the long-term trends of the market.

Stocks are not the only place to invest though. Other major
investment markets include Foreign Currency Exchange, Futures,
and Options markets. Globally, the largest single segment of the
investment sector is in Foreign Currency Exchange. Currency
traders move very large sums of money between different
currencies very quickly to take advantage of small fluctuations
in the exchange rate. These trades usually are only owned for a
day and are only profitable if the trader is very attentive to
factors influencing the day’s rates.

Futures Markets are designed to give buyers and sellers in
volatile markets fixed prices at set times. The price for a
quantity of goods is fixed in the contract, as is the time of
the delivery. When the market then fluctuates, the locked in
price for the contracted good means that the value of the
contract itself changes. Traders in Futures are less interested
in the price obtained in the contract for the goods, but are
interested in the value of having that price fixed against the
changing actual price of the goods.

The Options Market also deals with contracts for future prices.
The difference from the Futures market is that Options allow the
owner to buy at a specified price before the date given, but
does not force the owner to buy that item. The Options
themselves may be bought and sold, or used on a higher-risk
investment as insurance. These investment tools have a high risk
of loss. It requires a specialized knowledge of the option
itself as well as the market it is trading in to make a profit.
Most traders also benefit from having experience in a market.
Stocks require less specialized knowledge to invest in with
relative safety because the market as a whole changes more
gradually than options on the market change. Stock traders can
invest in certain ways intended to change the value of holdings
very quickly, but the majority of investors put their long-term
investments into stocks.

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