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how stocks trade full information

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As we saw in the previous section, once a company completes an initial public offering (IPO), its shares are made public and can be traded on the stock market. The stock market is the place where stock buyers and sellers meet and decide the transaction price. Some exchanges are physical locations for transactions in the trading floor, but more and more stock exchanges are virtual, consisting of computer networks that trade electronically.

how stocks trade

The stock market is a secondary market where existing stock owners can trade with potential buyers. It is important to understand that companies listed on the stock market do not regularly buy and sell their own stocks (the company may repurchase shares or issue new shares, but these are not routine operations and often occur outside the exchange framework). Therefore, when you buy stocks in the stock market, you are not buying stocks from the company, but buying stocks from other existing shareholders. Similarly, when you sell a stock, you won’t sell it to the company – it sells it to other investors.

The first stock markets appeared in Europe in the 16th and 17th centuries, mainly in port cities or trade centers such as Antwerp, Amsterdam and London. However, these early stock exchanges are more like bond exchanges because a few companies do not issue stocks. In fact, most early companies are considered semi-public organizations because they must be chartered by the government to conduct business.

In the late 18th century, the stock market began to appear in the United States, especially the New York Stock Exchange (NYSE) allowed stock trading (the honor of the first US stock exchange was attributed to the Philadelphia Stock Exchange [PHLX], which still exists today) . The New York Stock Exchange was founded in 1792, and 24 stockbrokers and businessmen in New York City signed the Buttonwood agreement. Before this official registration, traders and brokers will informally meet under a sycamore tree on Wall Street to buy and sell stocks.

The emergence of modern stock markets has ushered in an era of regulation and specialization, and now ensures that stock buyers and sellers can believe that their transactions will be completed in a reasonable amount of time at a reasonable price. Today, there are many stock exchanges in the United States and around the world, many of which are electronically linked. This in turn means that the market is more efficient and more liquid.

There are also many loosely regulated OTC exchanges, sometimes called bulletin boards, which are acronym OTCBB. OTCBB stocks tend to be more risky because the companies they list fail to meet the more stringent listing criteria of larger exchanges. For example, a larger exchange may require the company to have been in operation for a period of time prior to listing, and it meets certain conditions regarding the company’s value and profitability. In most created nations, stock trades are self-administrative associations (SROs) that have the expert to create and uphold industry guidelines and gauges for non-legislative associations. The stock exchange’s priority is to protect investors by establishing rules that promote ethics and equality. In the United States, examples of such SROs include individual stock exchanges, as well as the National Association of Securities Dealers (NASD) and the Financial Industry Regulatory Authority (FINRA).

Stock prices in the stock market can be set in a variety of ways, but most of the most common way is through the auction process, buyers and sellers can bid to buy or sell. The bid is the price that someone wants to buy, and the offer (or asking price) is the price that someone wants to sell. When the bid and the asking price coincide, the transaction is made.

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