The Stock Market a simple definition

So what is the Stock market? It is a place to buy and sell stock and shares. The stock market manages the trading of securities giving business access to investors and their capitol. It is a major contributor to the market economy. With 3 main stock markets in the USA investors are able to risk there capitol and invest in business planning to make profits based on a forecast of the businesses future performance.

The NASDAQ or The National Association Of Security Dealers Automated Quotation to give it it's full name opened in 1971; this was the first exchange to trade electronically anywhere in the world. The NASDAQ is not based anywhere as it is a virtual exchange; there is no trading floor where you will see dealers. It is a network of computers linked together.

The NYSE stock market, which stands for New York Stock Exchange, is a corporation operated by a board of directors. The board of directors is responsible for listing securities along with setting policies and supervising their members' activities. The NYSE uses floor traders; people that is, to make trades unlike other stock exchanges that typically use computers to make their trade transactions.

The AMEX stock market, which stands for American Stock Exchange, is the third largest stock exchange based on its trading volume in the United States. AMEX handles 10% of the securities that are traded in the United States.

Stock exchanges also process what is called "over the counter markets" or OTC; this is also know as the Equity Market. These are the listing of small companies stocks. In the USA there are two OTC exchanges; they are the "Pink Sheets" and the "OTCBB" or Over the Counter Bulletin Board. This is where companies who are not traded by the big 3 are managed.

The stock market allows investors to buy and sell ownership shares of publicly traded companies. You can make money within the stock market in two different ways. The first is through capital gains and the second is through dividends.

When a company increases its capitol assists this intern produces a capitol gain. This increase will drive up the value of the company's shares. An investor makes money on the difference between the price they paid and the increased value of the share.

A dividend is a payment of part of the company's profits; this is decided on by the board of directors. The set the level of divided to be paid out per share; the more shares owned the more return the investor receives.

Being a shareholder you become one of the many owners of a company. This gives you the right to a claim on all the company owns. You are entitled to a share in the company profits as well as the right to vote dependant if the stocks you have purchased through the stack market have voting rights included. The more stocks you own the more of the company you own and the more you can earn from the companies earnings.

There are two types of shares that you can purchase from a company through the stock market. The first is the common share and the second is the preferred share. The common share, also known as a common stock is at the bottom of a company's priority ladder. If the company your invested in through the stock market becomes bankrupt or needs to liquidate their assets, you will not receive any money for your stock until the creditors and preferred shareholders receive theirs. However if you purchase a preferred share through the stock market, also known as a preferred stock, you have top priority to receive money if a company becomes bankrupt or has to liquidate its assets. The downfall to buying a preferred stock through the stock market is that you will not be given any voting rights to a company, which means that you have no say in how the company may conduct business.

Trying to understand the stock market appears to be extremely difficult and yes it does take some time to understand. If you break the aspects of the stock market down into sections and study them one at a time you just may find its not as complicated as it may seem. The stock market can be complicated but if you're a beginner just take it one step at a time it really isn't as difficult as it appears.

Article Source: http://www.rightarticle.com

The StockMarket Genie can show you how to trade. Download your free 7 part mini-course "What the Wall Street Hot Shots Won't Tell You!"

Please Rate this Article

5 out of 54 out of 53 out of 52 out of 51 out of 5 

Not yet Rated