A Stock Market Overview of Stock Trading and Prices

Welcome to the stock market overview of how stocks are traded and why prices of stocks changes. So let's get right to the subject at hand. If your missed the earlier stock market overview, you can go back and read up on what a stock is and the different types of stocks, then return here.

How Do Stocks Trade?

If you are not familiar with stocks, you may be familiar with the different exchanges that they are traded on. The New York Stock Exchange (NYSE), the Nasdaq, and the American Stock Exchange (AMEX) are the three largest in the United States. Every country has their own stock exchange such as the London Stock Exchange and the Hong Kong Stock Exchange.

The exchanges are basically the places where buyers and sellers meet and decide on a price. Some of these are actual trading floors and some are virtual comprised of computer networks. They make buying and selling stock easier. Instead of having to call around the world or the state looking for a buyer, you just go to the exchanges.

The stock market itself has two markets a primary, where securities are created by the issuing company, and a secondary market, where investors trade previously issued sercurites without company involement. The secondary stock market is what is referred to when we are referring to when we talk about these exchanges.

Stock Market Overview of Exchanges

NYSE
The most prestigious exchange in the world in the New York Stock Exchange. The "Big Board" was founded in 1792. The NYSE houses stocks like General Electric, McDonald's Citigroup, Coca-Cola, Gilette and Walmat. It is the market choice for the largest companies in America. Trades are made on the floor and then sent back to a brokerage firm who notifies the investor. But computer do play a large role in the process.

The Nasdaq
The Nasdaq is the most popular virtual exhange part of the over-the-counter (OTC) market. There is no central locations or floor brokers. Trading is done through computers and telecommunication network of dealers. Due to its popularity, a number of lagre companies like Microsoft, Cisco, Intel, Dell and Orcale make the Nasdaq a serious competitor for the NYSE.

Other Exchanges
The last worth mentioning is the over-the-counter bulletin board (OTCBB). This is for small listing companies that do not meet the requirements of the regulated markets. This is where people buy and sell penny stocks. Investing in OTCBB is very risky as there is little to no regulation.