Stock Trading - Forex And Day Trading Info

Written by Jacey Harmon
Bookmark and Share

Stock trading has been around in the United States for over two hundred years. Most people think of the great market crashes and believe that trading stocks is a losing proposition. In reality the stock market has steadily advanced throughout the years. Anybody with an employer sponsored retirement plan, or individual retirement plan is invested in the stock market.

A Brief History of the Stock Market.

The first stock exchange in the United States was founded in Philadelphia in 1791. However the very next year, a group of 12 men called the "Buttonwood Group" formed a trading agreement that would later become the New York Stock Exchange (NYSE). At first the group traded only bonds as stock trading was still in its infancy. By 1865 the New York Stock Exchange moved into its first permanent facility and by 1868 the NYSE had 533 members, businesses allowed to trade on the exchange.

Stock trading remained rather obscure until the railroad expansion of the early 1800s. After the first railroad stock entered the market, Mohawk & Hudson Railroad, trading expanded leaps and bounds. After nearly 60 years the NYSE expanded from having only a few bank stocks trading daily to having an average of 70,000 plus shares trading hands every day. However, membership to the NYSE was limited which created the rise of competing stock exchanges.

We fast forward a couple of hundred years and the stock market has expanded throughout the world. Today there are two main stock exchanges in the United States, the NYSE and the NASDAQ, though other exchange floors do operate. The NYSE is the oldest and it is where a majority of the older established company's trade. Large corporations like General Electric, Chevron/Texaco, and General Motors all trade on the NYSE. The NASDAQ, which stands for National Association of Securities Dealers Automated Quotation System, has lower listing requirements than the NYSE. The lower listing requirements allow for younger, faster growing companies to list their stock on the NASDAQ exchange. Microsoft, Intel and Cisco Systems are all NASDAQ traded companies.

What Is a Stock?

A stock is a certificate of ownership in a business. When you buy a share of stock you are buying a piece of a business. The shareholders elect a board of directors whose job it is to run the business for the benefit of the shareholders. Owning stock requires an investor to take on a certain amount of risk. However if the company is managed correctly and experiences large growth the shareholder will be rewarded for taking the risk. If a business goes belly up, the shareholders are last in line when assets of the business are sold off, hence the risk.

A corporation will issue stock for a variety of reasons. The main reason for issuing shares is to acquire capital to fund mergers, fund research, or to reduce debt. Issuing stock allows for management to have greater flexibility in diversification of investments as publicly traded shares are more easily sold than private shares. Issuing stock is a great way to attract employees by giving shares to employees as a benefit.

Modern Stock Trading.

The introduction of the Internet and the expansion of the United States have meant a rapid rise is trading stocks. The Internet has made information that was previously available only to professionals available for anybody to use. The expansion of the United States has meant more people to invest, more businesses to invest in and more choices of who to invest with. All these have played a role in the rapid rise in both market activity and stock prices.

On an average day the NYSE can trade as many as 1.4 billion shares, a far cry from the 70,000 in the mid 1800s. The NASDAQ is much more active with a current average volume of 1.6 billion shares. There are about 10,000 companies that are publicly traded on the NYSE and NASDAQ combined. The largest publicly traded company is General Electric, which trades on average 15 million shares a day and has roughly 10 billion shares issued.

Trading stocks is not a losing proposition if you are willing to work at it. Most individuals do not have the patience or desire to learn how to understand the market. In reality it takes a strong passion to succeed in trading stocks, one that can withstand failure and fear. For most people the best way to invest is to buy a Mutual Fund and let a professional manage their money. For the few that have the passion, there is a variety of different sources available online to help them manage their money.


Bookmark and Share