A Smart Investor’s Guide to the Stock Market

When it comes to the stock market, no matter whether it is International or US-based, it can be hard to understand and know what is going on and how to use it. In this article, we will cover some of the American stock exchanges and give a few definitions.


So what is a stock market and how does it work?

  • Stock markets don’t have shares; it is more like buyers connecting with sellers, or a client going through a broker.

  • An IPO is an initial public offering and that is how stocks get started by being sold to those investors first.

  • After going through the Public shareholders, the stock will then be available on the secondary market.

These exchanges track the order flow for each stock listed. Stock prices are created by the demand and supply of these stocks.

Many different definitions are part of the stock market such as “bid price” or purchase price and “ask price” is the selling price of the stock. EFT – Exchange Traded Funds is a stock or security that trades like a stock on the exchange but tracks like an index.

Auction based exchanges are exchanges that specialists are present at and work in during an auction of stocks. Some American exchanges that work in this fashion are the AMEX and NYSE.

Traders and Brokerage Firms

If you take a look at the NASDAQ, this is an electronic exchange. What this means is that traders, brokerage firms and computers are all connected via computer to real-time stock market trading. This is one of the most important of the stock markets in the US.

A broker is one that uses his or her expertise to trade stocks with other people’s money. He or she is paid well to utilize that expertise to create and develop a very diverse portfolio. There are many online brokers that work with the stock market and can help a person invest money.

However, trading on the stock market is a little different than trading on the Forex market. The rules are a bit different from governing traders.

Rules and Regulations Governing the Stock Market

When it comes to regulations and securities, there have been five laws passed to regulate the trading of stocks and securities. These include the Investment Advisors Act (1940), Investment Company Act (1940), Trust Indenture Act (1939), Securities Exchange Act (1934) and Securities Act (1933).

Other stock exchanges such as the Dow Jones, NYSE and other stock exchanges have their rules and regulations, which are too many to list in this article. Each stock market will have different rules regarding trading, brokering and stocks. Consult each stock market carefully before trading.

In Closing, There is not enough room in this article to go into a detailed examination of all the salient points of working in the stock market. We have covered most of the important ones for the utilization of the American stock market.

Arm yourself with knowledge and research before you attempt to trade in any stock market, American or otherwise. While the rules governing the London Stock Exchange or other overseas exchanges may be different, consider the rules carefully before you start trading on any stock market.

Beginner or a seasoned pro, the information in this article is a starting point for the exploration of what a stock market is, what it does and how to work it.

Author Bio: Criss Dreck utilizes her knowledge of the American stock market to help her clients. She recommends using Stock Alarm – Market Alerts IOS App that is specially designed for serious traders in the market.

With this Stock Alarm you can trade in the market like a pro as it helps the day/swing traders from all backgrounds to set conditional alarms to be triggered from live stock price movement.