The Basics of the Stock Market
The stock market is made up of exchanges such as the Nasdaq and New York Stock Exchange (NYSE). Company stocks are listed on a particular exchange that brings together buyers and sellers so that traders can buy or sell stocks on the exchange. The exchanges track the prices of stocks that are set based on what traders are willing to pay for a stock, or the selling price they are willing to settle for.
To execute trades, individual traders are normally represented by brokers – and nowadays all of them are online. The exchange handle your stock market transactions through the broker, who then handles all of the transaction details within milliseconds on your behalf as you execute your trades.
The NYSE and Nasdaq are open from 9:30 am to 4:00 pm (Eastern Time), however, trading can take place before and after those hours depending on the broker. Trading outside of the regular market hours can lead to very irregular market moves.
When talking about the stock market going up or down, what people are usually referring to is one of the major stock market indices.
A stock index tracks the performance of a group of stocks that represents either the market as a whole, or a specific sector of the market, such as technology or retail companies. You will probably hear most about the Dow Jones Industrial Average, the Nasdaq Composite and the S&P 500 – these indices are often used as indicators of overall market performance.
The Truth Is Most Traders Fail
Don’t let anyone tell you any different, trading is not easy. However, trading successfully is a skill that can be learned. To trade successfully there are numerous factors that need to be taken into account, and you should always bear in mind that past success is no guarantee of future success. Trading is always risky and you should never risk money that you cannot afford to lose.