American Stock Market
There are three major players in the American stock market. They are the New York Stock Exchange, the NASDAG and the American Stock Exchange. All three are engaged on the business of buying, selling and trading stocks. Buying stocks are the ways in which people invest in companies through a broker and in essence become one of the owners of that company. When the company does well and makes a profit, the stockholders also make a profit. At the same time, when the company loses money, the value of the stock goes down and stockholders lose money as well.
The New York Stock Exchange (NYSE) originated with the Buttonwood Tree Agreement in 1793, formed by a group of powerful merchants. This is the largest stock market in the world with an average day seeing more than 1.8 billion shares being traded for more than $69 billion. It became a publicly traded company on March 8, 2006.
The NASDAG is the second largest stock market in the US and was the first electronic market in the world when it started in 1971. Through its development over the counter method of buying, selling and trading stocks, it opened the doors for many more people to become involved in the stock market. It was also the first to display the highest bids for buying and selling stocks on a screen. The “level two” quotation system it uses today provides investors with the best supply and demand information available.
The American Stock Exchange (AMEX) began in the mid-1800’s by trading securities on the street. At this time it didn’t have an official name. When it moved the business indoors in 1921, it took on the official name. Although it did merge with NASDAG in 1998, it continues to operate separately.
Some of the common terms involved in the stock market are:
• Bid – the highest price a trader is willing to pay for a stock
• Ask – the lowest price at which a trader will sell a stock
• Limit Order – allows a trader to enter the share quality and the execution price
• Market Order – specifies the number of shares to be sold immediately
• Stop Loss – an order that will limit the amount of loss a trader sustains in the sale of a stock
All companies that trade on the stock market issue earnings reports four times a year. There are warnings issued about two weeks prior to the main reports so that investors can sell their shares or buy more depending on whether the company has made a profit or sustained a loss. Traders analyze the fundamentals of the companies in this process by comparing the company’s earnings with previous reports to determine if there is a trend.