Now that you have learned what stocks are and how to purchase those, lets address how stock is purchased.  Even if you do online trading, there is an individual who is licensed to buy shares that you have authorized for you.  This person uses an exchange where all trades come together and are transacted.  There are basically two exchanges.  One is known as the New York Stock Exchange (NYSE) and is located on Wall Street in New York City.  The NYSE is a large room with many trading posts where trades take place.  Each post has a specialist who handles specific securities.  He can act as a broker’s broker and make commissions on the trades or he can buy and sell his own transactions.  The NYSE is not directly involved in the actual transactions (trades) but acts as a police officer enforcing certain rules to ensure fairness.

The NYSE sets the policies of rules and regulations and decides which stocks are eligible for listing and which firms can become members of the exchange.

Another type of exchange is known as the Over the Counter Stock Exchange or NASDAQ.  The NASDAQ is literally an association of National Stock Dealers and has neither physical location nor trading posts.  This exchange is 100% electronic and the traders are replaced with Market Makers (MM).  These Market Makers are individual firms willing to make a market.  In general the Market Maker has a position in a particular stock and sells out of his own inventory.  Market Makers make the money from a markup or markdown rather than from commissions.  The Market Maker regularly publishes Bid and offer quotes and is ready to buy or sell the stock at the quoted prices.

It is important to determine your stock investment and stock trading objectives as it varies for each individual.  Certainly a 23 year old with a family will have different objectives than a 45 year old with his family mostly out of the house or even a 60 year old approaching retirement.  Before you start investing in the stock market, write down your objectives and goals as an investor along with your present and future financial responsibilities.  You should never begin a stock investment program until you have at least three months of savings to fall back on if something were to happen to your daily financial program.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind.  The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials.  Trading of securities may not be suitable for all users of this information.