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Trading Basics Part 1: What are Stocks and Exchanges?

If you want to learn to trade like a pro, you’ve got to start with a good understanding of the basics. Our four-part series on trading will give you a foundation to start from.Money, Stocks, and Business

What are stocks?

First, if you’re going to be trading, you have to understand what exactly is meant by “stocks” and “exchanges” Stock ownership is the holding of a minute percentage of a company.  You’ve probably also heard of commodities and commodity futures. Basically, a commodity is a class of goods that’s used in the production of other end goods. We’ll cover them further in a later post.

What’s an exchange?

Shares of stock of publicly traded companies are traded on stock exchanges. The two largest exchanges in the U.S. are the NYSE & NASDAQ.  The NYSE is an “auction style” exchange. It consisted mainly of professional floor traders and “specialists” until approximately 2001, when it began to allow shares traded on an electronic basis.

NASDAQ, on the other hand, is an OTC (over-the-counter) market and has no trading “floor.” Instead, it’s a network of computers with market makers providing liquidity at or near “inside market” prices. All NASDAQ trades, whether by market makers or by individual traders, are executed electronically.  Up until recently, stocks having 1, 2 or 3 letter symbols were traded on the NYSE.  Those with 4 or 5 digits were NASDAQ traded stocks.

Want to learn even more? Check out our Website at www.LeadingEdgeTrading.com
to discover what it takes to trade like a pro.

Posted by Ford Saeks on October 27, 2014 in Trading Basics.

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