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Trading Stocks

Stocks - Red and green of stock exchange

Have you ever wondered what is the common link between Microsoft, Google, Arcelor-Mittal and other billion dollar companies? It is that they all are listed on the stock exchange. Stock exchange is the place where stock traders or brokers buy and sell a companies stock. Also, it allows for the redemption and issue of securities, payment of dividends and income and other economic instruments. Unit trusts, shares issued by companies and other investment bonds and products are some of the securities that are traded on a stock exchange.

The companies list themselves on a stock exchange. General public can buy or sell your share and gain or lose a substantial amount of money. However, a person can not directly buy or sell the share of a company. Shares are brought through the brokers or stock market traders, who are the members of the stock exchange. The value of a company’s share depends on its market value, and the value of a share changes as per its quarterly results and other developments.

London stock exchange was the first stock market of the world. Other stock exchanges are: Shanghai Stock Exchange, NASDAQ, NYSE Euronext, Hong Kong Stock Exchange, Australian Securities Exchange and Frankfurt Stock Exchange. All the major IT companies of the world are listed on NASDAQ in America. Stock exchange is a reflection of the economy of a country. If the value of a stock market is high, it indicates that the economic situation of a country is healthy. Depression and economic recession can pull the value of share market down. Any fall in agricultural or industrial production and climate change can lower the value of a stock market. Any change in stock exchange of a developed country can directly affect the stock exchange of other countries. For instance rise in debt fear in United States lead to the fall in the value of economy the world over. Also, attack on world trade center in united state; saw the prices of stock prices in red. Red color indicates negative color while green stands for rise in share prices.

With the advent of the Internet, stock trading can now be done online. Stock exchanges the world over are closed on Saturdays and Sundays. Also, on the national holidays it is closed. The initial pricing of bonds and stocks is done first in primary market and then in secondary market.

The roles of stock exchanges in the economy are:

Raising Capital
A company can raise money by selling shares to the public.

Mobilizing Savings
Diverting resources from bank and other financial resources to shares can make you gain money, and result in economic growth.

Facilitating a firm growth
Firms acquire other company so as to hedge against instability, essential business assets, increase channels of distribution and spread out the product lines.

Relocation of Wealth
The company’s distribute their profit share to their stock holders in the form of dividend. This way more and more people invest in their company, and the money they receive can be used for growth of the company.